Dayton Hudson Corporation and Subsidiaries - Page 12

                                       - 12 -                                         
          following the year of opening.  In most cases, Target set accrual           
          rates for new stores by considering the average shrinkage rate              
          for the district in which the new store was being opened.  Target           
          also considered the demographics of that district, as well as the           
          marketing plan of “sister stores”--stores that are located in               
          areas with similar demographics and have merchandise mixes                  
          similar to that anticipated for the new store--in setting accrual           
          rates for new stores.                                                       
                    3.  Warehouses                                                    
               During 1979 through 1984, physical inventories were                    
          performed at Target's distribution centers and metro warehouses             
          (hereafter, collectively referred to as “warehouses”) once each             
          year prior to the close of the taxable year, during the months of           
          December or January.  The results of the physical inventories at            
          the warehouses were taken into account in April of the subsequent           
          taxable year on a departmental basis by the Target stores                   
          serviced by each particular warehouse.  The amount of shrinkage             
          was allocated to the Target stores based upon the store's use of            
          a particular warehouse.  That practice reflected the                        
          determination that the warehouses' shrinkage generally reflected            
          billing errors to stores.                                                   


               C.  Proposed Deficiencies With Respect to Target                       
               In the notice of deficiency, respondent disallowed shrinkage           
          accruals for 1984.  The LIFO cost adjustment was $36,339,217,               




Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011