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Petitioner paid the invoices rendered by Alexander Air,
including freight charges and customs duties within 2 weeks to 1
month. Petitioner never failed to pay any amount owed to
Alexander Air, but on occasion, if Alexander Air was short of
cash funds, petitioner would pay the amount of the customs duties
directly to the Customs Service. Petitioner never paid customs
duties in excess of amounts computed by Alexander Air and shown
on the customs entry form.
Petitioner on its Federal income tax return for its fiscal
year 1989 deducted $398,900 of "duty & custom service" and
$33,318 for "freight & delivery". For its fiscal year 1990,
petitioner deducted $630,135 for "duty & custom service" and
$53,790 for "freight & delivery".
Respondent determined in her notice of deficiency that
petitioner received gross receipts in the amounts of $1,189,925,
$4,194,099, and $6,313,263 in lieu of $791,042, $3,739,433, and
$4,681,229 reported on petitioner's tax returns for its fiscal
years 1988, 1989, and 1990, respectively. Respondent also
determined that petitioner's costs of goods sold were in the
amounts of $757,582, $2,811,340, and $3,989,973, in lieu of
$752,044, $3,194,122, and $3,804,065 reported on petitioner's tax
returns for its fiscal years 1988, 1989, and 1990, respectively.
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