- 78 -
Moreover, in calculating the markup taking into account
respondent's increase in gross receipts, Shimmon accepted as
accurate the reductions to purchases expense determined by
respondent on audit. Following concessions by the parties and
our decision relating to that issue, see supra, Shimmon's figures
are no longer accurate. Rather, after taking into consideration
the adjustments to the unreported income and cost of goods sold
determined by respondent as discussed supra, the restaurants'
markups for the years in issue fall below the 225-percent top
range used by Shimmon.18 Consequently, the adjusted purchases
18 Using totals for the two restaurants owned by Toraya and
the one restaurant owned by the Takaos, the adjusted markups are
computed as follows:
1988 1989 1990 1991
Gross
receipts
per
return $1,286,571 $997,067 $810,958 $740,860
Unreported
income 90,900 78,675 35,400 7,800
Adjusted
gross
receipts 1,377,471 1,075,742 846,358 748,660
Cost of
goods sold
per return 467,757 357,634 279,183 249,129
Adjustment to
purchases (3,000) (3,100) 6,000 --
Adjusted cost
of goods sold 464,757 354,534 285,183 249,129
(continued...)
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