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Respondent claims that there is no evidence to prove the ASA
merchandise was included in petitioner's ending inventory for the
tax year ended June 30, 1990 or 1991.
We conclude that the ASA merchandise was included in
petitioner's ending inventory for the tax years ended June 30, 1990
and 1991, and hence petitioner's cost of goods sold for those years
was not overstated. Thus, petitioner received no tax benefit as a
result of mistakenly treating and reporting the ASA consigned
merchandise as a purchase.
In reaching our conclusion that the ASA merchandise was
included in petitioner's 1990 and 1991 ending inventory, we find
that Mr. Rosales, petitioner's comptroller, recorded the
transaction consistent with his understanding that the consigned
goods were acquired by purchase, and thus he included all unsold
goods in inventory. We find compelling that on petitioner's tax
return filed for the year ended June 30, 1993, petitioner made an
adjustment to its beginning inventory when it realized the error in
its reporting of the consigned goods. (Rather than carry over the
ending inventory balance for the year ended June 30, 1992,
petitioner reduced beginning inventory for the year ended June 30,
5(...continued)
Total goods available for sale
- Ending inventory
Cost of goods sold
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