Jerry L. Crabtree - Page 13

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             multiplied the number of drinks per bottle by the price                  
             charged per drink to obtain total liquor sales.                          
                  Ms. Crabtree told the revenue agent the prices charged              
             for bottles of alcohol sold in the package store.  The                   
             revenue agent multiplied the number of bottles sold in the               
             package store by the price per bottle to determine total                 
             sales in the package store.                                              

             Income From Cover Charges                                                
                  Respondent’s agent computed income from cover charges               
             of $91,000 for each of the years in issue.  The notices of               
             deficiency issued to Crabtree Investments provide the                    
             following explanation of the computation of this amount:                 

                  Cover Charges were determined by using a $1                         
                  charge for 52 Thursday nights per year times 250                    
                  (the lounge capacity) and a $2 charge for 104                       
                  (Friday and Saturday) nights per year times 375                     
                  (1 1/2 times the lounge capacity) or $91,000.                       

             This adjustment is based upon the information provided by                
             Ms. Jerry Crabtree and Mr. Eddie Crabtree during their                   
             initial audit interviews with the agent.                                 

             Income From Food Sales                                                   
                  Respondent determined food sales from the bar to be                 
             $125 per week or $6,500 per year for each of the taxable                 
             years in issue.  The notices of deficiency issued to                     

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Last modified: May 25, 2011