Jerry L. Crabtree - Page 17

                                       - 17 -                                         

                  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                 

Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011