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Annotations to Table 1
TYE 8/31/89
1. In computing operating expenses for the year,
respondent excluded amounts as to which a claim for deduction
was disallowed in the notice of deficiency. After trial
respondent conceded that payments for insurance premiums were
properly deducted as ordinary and necessary expenses.
Therefore we have included them.
2. Respondent included in operating expenses for the
year the amount of Federal income tax determined in the notice
of deficiency. The taxes that should be taken into account are
petitioner’s estimated tax payments. Doug-Long, Inc. v.
Commissioner, 72 T.C. 158, 176-177 (1979); Empire Steel
Castings, Inc. v. Commissioner, T.C. Memo. 1974-34.
3. Respondent calculated the length of petitioner’s
credit cycle by multiplying the number of days in the year by a
quotient of which the numerator is peak payables for the year
and the denominator is total merchandise purchased for the
year. Petitioner argues that the length of its credit cycle
for each of the taxable years at issue was no more the 10 days.
The basis for this figure is Hagerman’s testimony that
petitioner regularly paid its bills every 2 weeks. Our cases
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