- 17 -
93 (3d Cir. 1928) (approving assertion of a deficiency based upon
the Commissioner's "observation of earnings made and taxes paid
by a corporation in a like business"), affg. 6 B.T.A. 570 (1927);
Giddio v. Commissioner, supra at 1532 (approving determination of
taxable income based upon Bureau of Labor Statistics report of
average cost of raising a family in New York).3
III. Petitioners' Evidence of Income
In this case, respondent had no quarrel with the amount of
petitioners' costs or expenses of operating Nick's Liquors.
Respondent's differences with petitioners instead involve the
amount of their gross profit margins. As we have held,
petitioners have failed to show that respondent's determinations
are arbitrary or unreasonable. Accordingly, the presumption of
correctness that attaches to respondent's determinations remains
in force. Harbin v. Commissioner, 40 T.C. 373, 376 (1963).
Petitioners thus bear the burden of proving that respondent's
determinations were erroneous. To some extent, they have
succeeded. At trial, petitioners presented sufficient evidence
3 Our cases reflect a number of instances approving
respondent's use of markup percentages based upon third-party
sources to determine taxable income. See, e.g., Estate of Shuman
v. Commissioner, T.C. Memo. 1995-327 (use of gasoline station
markups based upon publications of Department of Energy and Oil
and Gas Journal plus competitors' prices); Biggs v. Commissioner,
T.C. Memo. 1985-303 (use of percentage markup based upon advice
of local plumbers' unions); Howse v. Commissioner, T.C. Memo.
1974-225 (use of percentage markup based upon reports of National
Sporting Goods Association).
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