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Frederick H. Robinson, Craig D. Miller, Patricia M.
Lacey, and Gary R. Vogel, for petitioner.
Reid M. Huey, Nancy B. Herbert, Robert J. Kastl,
Jennifer H. Decker, James E. Kagy, Timothy S. Sinnott, and
Richard G. Goldman, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: Respondent has determined deficiencies in
petitioner’s Federal income tax liabilities for the years 1984,
1985, and 1986 in the amounts of $7,152,527, $1,772,936, and
$1,668,392, respectively. The parties have reached agreement on
certain issues, and the only 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 years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some facts have been stipulated and are so found. The
stipulations of fact filed by the parties and the accompanying
exhibits are incorporated herein by this reference. The parties
have made approximately 450 separate stipulations of fact,
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