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taxable years, the allocation was made on the basis of the
relative value of ending inventory in each department (net of
shrinkage as allocated) as reported in the yearend purchase recap
report. In petitioners' 1983 taxable year, the allocation was
made on the basis of the results of physical inventories taken
during the month of January 1984. A separate allocation in the
same manner was made for the stores of Parent, Kuhn's, and
Edwards.
Parent, Kuhn's, and Edwards each had its own LIFO pools.
Petitioners made separate LIFO computations for each of these
entities. Petitioners separately recorded shrinkage as verified
by physical counts by department for Parent, Kuhn's, and Edwards.
Petitioners also allocated aggregate estimated stub period
shrinkage separately to each of the entity's departments.
Petitioners did not allocate an estimate of shrinkage to pools at
the individual store level. Petitioners did not make yearend
allocations and reconciliations or LIFO computations for
individual stores. Yearend allocations and LIFO computations
were performed on a division-wide basis.
Petitioners reported the same shrinkage for both financial
and tax purposes. For purposes of preparing financial statements
7(...continued)
information in the general journal. The general journal
contained information on a store basis and contained basically
the same accounts for each store. The general journal contained
the records of the total shrinkage as verified by physical count
and estimated shrinkage by store, but not by department.
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