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Respondent does not challenge the value of the Berkeley
restaurant's 1989 beginning inventory. Petitioners contend that
Toraya combined the Berkeley restaurant's and the Post Street
restaurant's beginning inventories in calculating its gross
income for 1989. We have found that the Berkeley restaurant
closed in June 1989, and that any usable inventory was
transferred to the Post Street restaurant. Toraya would not be
entitled to write off any of the Berkeley restaurant's inventory
that remained on hand at yearend, because that inventory was not
abandoned but was transferred to the Post Street restaurant and
was includable in closing inventory for 1989. Toraya, however,
would be entitled to claim as part of its cost of goods sold any
of the Berkeley restaurant's 1989 beginning inventory that was
used or abandoned during 1989. Accordingly, we hold that for
1989, in the Rule 155 computations, in calculating Toraya's cost
of goods sold for the year, after taking into account any
adjustments to Toraya's cost of goods sold for the year agreed to
by the parties or decided by this Court, the Post Street
restaurant's closing inventory should be subtracted from the sum
of the Post Street and Berkeley restaurants' beginning inventory
and the allowable purchases by the Post Street and Berkeley
restaurants during 1989.
Unreported Income
Respondent determined that Toraya had unreported income,
consisting of (1) unexplained cash deposits into the bank
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