Robert A. & Gerri M. Smith - Page 11

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             accounting.  For 1993, petitioners changed to the cash method                                        
             without the Commissioner's permission to do so, and they used a                                      
             method of valuing inventory that fails to comport with any                                           
             recognized method.  Respondent, in essence, placed petitioners on                                    
             the cash method of accounting and the retail method of valuing                                       
             inventory, which is the method that most closely resembles                                           
             petitioners' inventory method.  Given respondent's broad                                             
             authority pursuant to section 446, the paucity of information                                        
             that petitioners maintained with respect to cost of goods sold,                                      
             and the fact that petitioners did not have a valid method of                                         
             accounting for reporting inventories, we reject petitioners'                                         
             contention.                                                                                          
                    Accordingly, respondent's determinations were not arbitrary                                   
             and petitioners must prove the correct amount of their tax                                           
             liability by a preponderance of the evidence.                                                        
             II. Adjustments to Respondent's Determinations                                                       
                    The Court may redetermine petitioners' tax liability if and                                   
             to the extent that petitioners demonstrate by a preponderance of                                     
             the evidence that respondent's determination is wrong.                                               
             Anastasato v. Commissioner, supra at 888; Miller v. Commissioner,                                    
             237 F.2d 830, 838 (5th Cir. 1956), affg. in part, revg. in part                                      
             and remanding T.C. Memo. 1955-112.  With respect to cost of goods                                    
             sold, to the extent the cost of hunting and fishing licenses was                                     
             included in purchases for the years in issue, such costs should                                      





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