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the cost of goods sold reported for either year included the cost
of the newspapers that petitioner purchased from the Star
Telegram. Petitioner estimated the amount of gross receipts
reported on the Schedules C based upon the checks that he
received from the Star Telegram.
Revenue Agent Heidi Wilder (Agent Wilder) conducted the
examination of petitioners' 1991 and 1992 Federal income tax
returns. Agent Wilder used the actual charges reflected on the
monthly circulation statements to determine petitioner's cost of
goods sold for 1991 and 1992. Petitioners agree that Agent
Wilder accurately calculated the cost of goods sold for each
year.
Agent Wilder used other information contained on the
statements to calculate petitioner's gross receipts for the years
1991 and 1992. First, she calculated an average evening "draw"
number for each month by adding the evening "draw" numbers for
Monday through Friday from the circulation statement for that
month and dividing that figure by the number of weekday delivery
days in the month. She did the same for the morning "draws".
Next, Agent Wilder calculated an average Saturday "draw" number
for each month by adding the Saturday "draw" numbers and dividing
that figure by the number of Saturdays in the month. Agent
Wilder then added the average evening "draw" figure to the
average morning "draw" figure to obtain an average daily "draw"
number. This figure was then subtracted from the average
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