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David R. Brennan and Walter A. Pickhardt, for petitioner.
Reid M. Huey, John C. Schmittdiel, Robert J. Kastl, and
Robin L. Herrell, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: Respondent has determined a deficiency in
petitioner's Federal income tax for its 1984 taxable year in the
amount of $17,384,314, and petitioner has claimed an overpayment
of income tax for that taxable year in the amount of $180,375.1
Previously, on respondent's motion for summary judgment, we
addressed one of the issues presented in this case. In Dayton
Hudson Corp. & Subs. v. Commissioner, 101 T.C. 462 (1993), we
held that section 1.471-(2)(d), Income Tax Regs., as a matter of
law, does not prohibit petitioner from making a shrinkage accrual
in computing book inventories. The issue remaining for our
consideration is the soundness of certain of petitioner's
accounting systems that allow for the accrual of an estimate of
losses from shrinkage factors (e.g., theft and errors in billing)
in determining book inventories.
Unless otherwise noted, all section references are to the
Internal Revenue Code in effect for the year in issue, and all
1 The claim for overpayment contests the disallowance of
shrinkage accruals in computing the tax consequences of a prior
settlement between the parties for the taxable year in issue.
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