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findings by this reference. At the time the petition in this
case was filed, petitioner's principal place of business was
located in Alviso, California. Petitioner keeps its books and
records on the cash method and has always done so. It files its
Federal income tax return using a fiscal year ending June 30.
Petitioner is a corporation engaged in the business of
asphalt paving and related services. Potential customers contact
petitioner, asking for an estimate to perform asphalt paving
work. Petitioner sends an estimator to examine the area to be
paved, to measure it, and to determine the approximate amount of
asphalt needed for the job. The estimator also considers the
equipment, number of workers, and time required to complete the
job. Two jobs could require the same amount of asphalt but have
different costs. For instance, it requires more time, and
possibly different equipment, to pave a parking lot with
structures on it than a wide-open parking lot.
The estimator prepares a "proposed worksheet", which
indicates all the factors involved in estimating a bid price for
a job. During the years in issue, the proposed worksheet had
three cost columns: Equipment, labor, and materials. The
equipment column had spaces to enter a description of the
equipment required, the hours required, and the hourly cost of
the equipment. The labor column had spaces to enter the
laborers' names, the hours required, and the hourly cost of each
laborer. Finally, the materials column had spaces for the
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