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establish that the amount reported as cost of goods sold was for
purchases and was paid.
This Court has consistently held that the cost of goods sold
is not a deduction (within the meaning of section 162(a)), but is
subtracted from gross receipts in the determination of a
taxpayer's gross income. Beatty v. Commissioner, 106 T.C. 268
(1996); Max Sobel Wholesale Liquors v. Commissioner, 69 T.C. 477
(1977), affd. 630 F.2d 670 (9th Cir. 1980); Sullenger v.
Commissioner, 11 T.C. 1076, 1077 (1948); see sec. 1.61-3(a),
Income Tax Regs. Section 1.61-3(a), Income Tax Regs., provides
that in a manufacturing, merchandising, or mining business,
"gross income" means the total sales, less the cost of goods
sold. Cost of goods sold does not involve the selling of
services. See sec. 1.61-3(a), Income Tax Regs.; see also Hahn v.
Commissioner, 30 T.C. 195, 197-198 (1958), affd. per curiam 271
F.2d 739 (5th Cir. 1959). Cost of goods sold must be reduced by
items withdrawn for personal use by the taxpayer and related
persons, see Tucker v. Commissioner, T.C. Memo. 1979-449;
Calamaras v. Commissioner, T.C. Memo. 1960-201.
Although not exactly clear from petitioner's presentation,
we assume that the cost of goods sold here in dispute relates to
petitioner's book marketing activity as well as his educational
seminar activity. In connection with his book marketing
activity, we assume that petitioner included the printing cost
that he paid in 1992 in the "purchases" component of his cost of
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