- 80 -
ratio of gross receipts of that restaurant to total gross
receipts19 of all restaurants. Accordingly, for each year the
unreported income in issue is allocable to the Toraya-operated
restaurants and to the Fillmore Street restaurant as follows:
Toraya Fillmore St. Total unreported
Year restaurants restaurant income
1988 $65,175 $25,725 $90,900
1989 51,217 27,458 78,675
1990 19,612 15,788 35,400
1991 4,438 3,362 7,800
The unreported income attributable to the Toraya restaurants is
taxable to it.
Petitioners' Alternative Positions
Petitioners contend, in the alternative, that Toraya, an
accrual basis taxpayer, is entitled to deduct additional sales
tax and California franchise taxes for the years in issue to the
extent that its gross receipts are increased to reflect
underreported income. Respondent concedes that petitioners are
entitled to the additional sales tax and California franchise tax
deductions for the years in issue. Accordingly, the additional
deductions are to be included in the Rule 155 computations.
19
Total Gross Gross
gross receipts- receipts-
Year receipts Toraya Percentage Fillmore St. Percentage
1988 $1,286,571 $922,439 71.7% $364,132 28.3%
1989 997,067 648,927 65.1% 348,140 34.9%
1990 810,958 449,608 55.4% 361,350 44.6%
1991 740,860 421,608 56.9% 319,252 43.1%
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