Jerry L. Crabtree - Page 12

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                  Throughout the years in issue, the bar at Justins sold              
             beer for $2 per bottle, draft beer in 10-ounce glasses for               
             $2 per draft, and liquor for $3, $3.25, and $3.50 per                    
             drink, depending on the type of liquor used.  Mixer liquors              
             increased the drink price by 25 cents.  Justins also sold                
             liquor, wine, and beer from the package store.                           
                  Petitioners kept no record of the number of drinks                  
             given away and did not keep records of broken bottles or                 
             spilled drinks.  During the initial audit interview,                     
             Mr. Crabtree informed the revenue agent that there was very              
             little spillage of alcohol at the bar.  In reconstructing                
             bar sales of liquor, the agent used a 10-percent spillage                
             or waste factor, and in reconstructing bar sales of draft                
             beer the agent used a 5-percent spillage or waste factor.                
                  During the initial audit interview, petitioners told                
             the revenue agent that the drinks sold in the bar contained              
             approximately 1 ounce of liquor.  This is consistent with                
             the practice of many other bars in the area.  The revenue                
             agent multiplied the number of liter bottles used in the                 
             bar by 33.8 in order to convert liters into ounces.  After               
             reducing the total volume in ounces by the 10-percent                    
             spillage or waste factor and assuming that each drink                    
             contained 1 ounce of liquor, the revenue agent determined                
             the number of drinks available per bottle.  She then                     

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Last modified: May 25, 2011