- 6 -
taxable years ending May 31, 1991 and 1992. The agent has a
bachelor of science and a master's in business administration in
accounting. The audit was extensive and lasted longer than 12
months. Petitioner provided the agent with all its books and
records. Although petitioner had previously been audited and
had not been required to change from the cash method of
accounting, the agent determined that petitioner was required to
account for inventories and use the accrual method of
accounting.
During the examination of petitioner's returns, petitioner
provided the following breakdown of the work in process as of
June 1, 1991:
Paper $55,000
W.I.P. camera 5,000
W.I.P. press 30,000
W.I.P. bindery 16,000
Jobs completed and shipped 38,000
Jobs ready to bill 13,500
Jobs at outside service 3,500
Total 161,000
Adjustments to Taxable Year Ending May 31, 1991
In the notice of deficiency, respondent determined that
petitioner was required to maintain inventories and use the
accrual method of accounting with respect to purchases and sales
of inventory items. Respondent increased petitioner's income
for the taxable year ending May 31, 1991, by $36,002 ($11,000 +
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