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We are not persuaded by Shimmon's testimony that Toraya
reported all of its gross receipts for the years in issue.
Shimmon relied on a average range of markups based on all types
and sizes of restaurants in arriving at his conclusion that
Toraya accurately reported its sales receipts for the years in
issue. It appears to us that many factors would affect the
markup a specific restaurant could support, including type, size,
and popularity. Toraya restaurants were sushi bar restaurants.
The record does not indicate what a typical markup for that type
of restaurant was during the years in issue. Shimmon rated the
Toraya restaurants as medium grade. The record does not indicate
the typical markup for that grade of restaurant. For the same
reasons, we are not persuaded that Shimmon's comparison of cash
sales to total sales is persuasive.
Additionally, Shimmon's calculations, based on the figures
reported on the tax returns, show markups for each year in issue
that are well in excess of the 100-percent markup yardstick that
the California Board of Equalization used to test the accuracy of
reported sales. Shimmon concluded that this result strongly
supported a finding that the unexplained bank deposits did not
arise from restaurant sales. In our view, however, the
differential also demonstrates the hazard of relying on averages
based on all types and sizes of restaurants in concluding that
the income of a specific restaurant was or was not understated.
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