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beer, which accounted for 42 percent of its sales, at an average
margin of 11 percent. Nick's Liquors sold wine and liquor, which
accounted for 22 percent of its sales, at an average margin of
13.5 percent. Cigarettes accounted for approximately 33 percent
of sales, and they sold at an average margin of 6.5 percent. The
other 3 percent of sales was for miscellaneous items.
Petitioners have not provided a sufficient basis for us to find
that their profit margin on miscellaneous items was less than the
approximately 27 percent proposed by respondent.
The overall result is that petitioners' weighted gross
margin for the years in issue is 10.54 percent.
IV. Petitioners' Theft Loss Deduction
On October 25, 1991, $22,773 was stolen from store No. 1.
Petitioners' logbook entry for that date does not contain an
entry for the amount of the day's sales receipts. Instead, the
logbook contains the following entry: "Robbed 10-25-91". Of the
amount stolen, respondent has allowed the deduction of $3,004,
which represents lottery tickets, receipts for the sale of those
tickets, and beer deposits. These apparently are amounts that
petitioners, in the course of their business, were holding as
agents for third parties, including the State of Indiana.
Section 165(h) permits a deduction for a loss arising from
theft. It is settled, however, that the amount of a theft loss
may not exceed basis. In the case of cash which is part of gross
receipts, the amount of loss due to theft is not deductible if
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