Dayton Hudson Corporation and Subsidiaries - Page 15

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          that maintained a particular department.  In conducting physical            
          inventories, Dayton's used its own employees, and, at times,                
          those employees were assisted by outside personnel.  The physical           
          inventories of the departments were performed at various times              
          throughout the year, and, during the year in issue, they were               
          performed as early as February 1983 and as late as January 1984.            
          After a physical inventory was taken, the perpetual inventory               
          system would be adjusted as necessary, and, generally, Dayton's             
          adjusted the department accrual rate for the balance of the                 
          taxable year to reflect the most recent shrinkage experience.               
               C.  Proposed Deficiencies With Respect to Dayton's                     
               In the notice of deficiency, respondent disallowed shrinkage           
          accruals for 1984.  The LIFO cost adjustment was $2,440,127,                
          which reflected a disallowance of shrinkage at retail for the               
          post-physical inventory periods in the amount of $4,625,877.                
               Dayton's had sales for 1984 in the amount of $415,467,423.             
          During the periods between the dates of the physical inventories            
          of the departments of Dayton's and the end of 1984, sales for               
          Dayton's were $254,488,635, or 61.3 percent of all sales for                
          1984.                                                                       












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