Apollo Overseas International, Inc. - Page 11

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          inconsistencies in respondent's calculation, notably that                   
          seemingly identical shipments are assigned substantially                    
          different customs duties.  However, the fact that the amount of             
          customs duties arrived at by petitioner's calculations is much              
          greater than either the amount reported on petitioner's returns,            
          or the amount calculated by Mr. Lee at the time the invoices were           
          prepared, indicates that petitioner's method of calculating the             
          appropriate customs duties overstates customs duties.  On brief,            
          petitioner calculated that the total customs duties for its                 
          fiscal years 1989 and 1990 were $792,121.09 and $1,194,213.13,              
          respectively.  However, petitioner deducted on its Federal income           
          tax returns only $398,900 and $630,135, respectively, for its               
          fiscal years 1989 and 1990 for customs duties for both garments             
          and badges.                                                                 
               We are convinced that the purchase invoices were properly              
          matched by respondent to the corresponding customs invoices.                
          Therefore, the numbers on the customs invoices represent the                
          calculations made by Mr. Lee at the time the garments were                  
          shipped.  It was these amounts that petitioner actually paid as             
          customs duties with respect to the documented sales for which the           
          record permits a matching with customs duties invoices.  These              
          are the amounts properly includable in petitioner's cost of goods           
          purchased or inventories as customs duties costs.                           
               There is some evidence in the record to indicate that not              
          all items were subject to customs duties that may explain some of           

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