- 4 -
hardware items, electronics, toys, candy, and pet supplies, as
well as apparel for men, women, boys, and girls.
Inventory is petitioners' most essential and valuable asset,
and it is critical to their success. Petitioners strive to
maintain enough inventory to satisfy their customers' needs,
while at the same time minimizing the dollar amount of their
inventories. One measure of the effectiveness of Wal-Mart's
inventory management is its impressive rate of inventory turnover
(sales/inventory). Wal-Mart's inventory turned over 4.5 times in
its 1983 taxable year, while the average turnover for Wal-Mart's
competitors was approximately 2.8 times. Another indication of
the effectiveness of Wal-Mart's inventory management was that
many other companies (both domestic and foreign) sought advice
from Wal-Mart on inventory management.
B. Respondent's Adjustments
Respondent issued petitioners two notices of deficiency, one
for their 1983 and 1984 taxable years and the other for their
1985 and 1986 taxable years. Both notices reflected an increase
to petitioners' ending inventories on account of respondent's
disallowance of their estimated inventory shrinkage.1 Respondent
1 The notice for 1983 and 1984 disallowed shrinkage
estimates for Wal-Mart only. The notice for 1985 and 1986
disallowed shrinkage estimates for Wal-Mart and Sam's.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011