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A, petitioner reported $322 in 1993 and $500 in 1994 for alleged
noncash contributions to various charities. In addition, in 1994
petitioner reported "donations" in the amount of $2,000 on
Schedule C in relation to her wholesale activity. In the notices
of deficiency, respondent disallowed $5,550 of petitioner's cash
contributions in 1993 and disallowed all petitioner's reported
contributions, both cash and noncash, in 1994.
Petitioner used the services of Mr. Stephen M. Baker, who
prepared petitioner's tax returns for the years in issue.
OPINION
Petitioner testified that she sold merchandise in her
wholesale activity at a "markup". Respondent argues that because
petitioner sold items at a markup, her sales could not have
resulted in a negative gross profit. Respondent determined that
petitioner is not entitled to cost of goods sold in any amount in
excess of the amount of gross receipts, which were reported on
petitioner's returns in 1993 and 1994. Petitioner has failed to
produce any evidence to refute the logic of respondent's
determination.
Cost of goods sold is an offset to gross receipts in
determining business gross income. Metra Chem Corp. v.
Commissioner, 88 T.C. 654, 661 (1987); sec. 1.61-3(a), Income Tax
Regs. Although cost of goods sold is not a deduction and,
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