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do not prescribe a single method for determining credit cycle.
However, the data do not corroborate petitioner’s position and
we are not aware of any authority for respondent’s formula.
Accordingly, we have used the quotient of average payables
divided by total operating expenses. See Snow Manufacturing
Co. v. Commissioner, 86 T.C. 260 (1986); Kingsbury Invs., Inc.
v. Commissioner, T.C. Memo. 1969-205.
4. The amount of working capital that a taxpayer could
reasonably expect to need for one operating cycle is determined
by multiplying total operating expenses for 1 year by the
length of its operating cycle expressed as a fraction of a
year. In her Bardahl calculations, respondent used the current
year’s operating expenses for this purpose. This Court has
often found it more appropriate to use the actual operating
expenses for the subsequent year as a proxy for the amount of
operating expenses that the taxpayer expected as of the close
of the year. Empire Steel Castings, Inc. v. Commissioner,
supra; Delaware Trucking Co. v. Commissioner, T.C. Memo. 1973-
29. The use of subsequent year operating expenses for purposes
of this calculation will result in a higher estimate of working
capital needs when a business’ costs are subject to inflation
or the business is growing. Petitioner argues that respondent
should have used its operating expenses for the subsequent
year. One problem with petitioner’s position is that for TYE
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