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We agree that respondent’s use of the unit markup
method is justified in the cases involving Crabtree
Investments. The revenue agent found a material
difference, approximately $400,000, between the aggregate
deposits made into Crabtree Investments’ account at First
Union Bank and the gross receipts reported on its 1992
corporate tax return. According to the bank statements,
aggregate deposits of approximately $800,000 were made into
the account in 1992. Similarly, according to the 1992
general ledger of Crabtree Investments (with the exception
of March deposits which could not be located) deposits
totaled $789,449. On the other hand, Crabtree Investments
reported sales of $479,829 on its 1992 corporate tax
return. The revenue agent also found that Crabtree
Investments did not maintain complete inventory records,
and the agent noted a substantial drop in reported sales,
from approximately $468,000 in 1992 to approximately
$260,000 in 1993. Furthermore, despite the cash nature
of the bar business, very little cash was deposited into
the corporation’s bank account. The daily records of
the business showed bar sales equal to the total checks
received with little or no cash.
In addition, two State taxing authorities noted the
inadequacy of Crabtree Investments’ records. First, the
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