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Although the evidence largely supports the accuracy of Lyell
Metal’s reported cost-of-goods sold, the evidence does indicate
that Lyell Metal did improperly include in its cost-of-goods-
sold computation some expenses for non-cost-of-goods-sold items
(i.e., Lyell Metal paid for some expenses by cash that were not
related to the purchase of scrap metal and to that extent Lyell
Metal’s purchases and its cost-of-goods-sold computation was
overstated), and Lyell Metal’s records relating to cash purchases
of scrap metal are not as complete as they should be. We do not
condone Lyell Metal’s failure to maintain more complete and
accurate records with regard to individual purchases of scrap
metal, particularly those where Lyell Metal made payment therefor
by cash.
Based on the evidence before us, we hold that Lyell Metal is
entitled to include 95 percent of its calculation of its
purchases of scrap metal by cash as part of its cost-of-goods-
sold computation for the years in issue. Cohan v. Commissioner,
supra. The 5-percent reduction that we sustain is supported by
the fact that Lyell Metal did include some non-cost-of-goods-sold
items in its cost-of-goods sold computation for some years and by
Lyell Metal’s incomplete recordkeeping.
For 1989 through 1992, the following schedule reflects our
computation and estimate of Lyell Metal’s total purchases of
scrap metal by cash, of Lyell Metal’s total cost-of-goods sold,
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