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Petitioner testified that based upon an examination of Classic
Pub's cash register tapes, the bar/restaurant sold an average of
700 drinks/shots during the Wednesday and Friday happy hours.
However, petitioners neither introduced the cash register tapes
into evidence nor quantified how selling 700 drinks/shots during a
Wednesday or Friday happy hour would alter the reasonableness of
respondent's reduction for discounted mixed beverage sales.
In sum, we sustain respondent's use of the percentage markup
method and respondent's determination of a 20-percent discount with
regard to Classic Pub's discounted mixed drink sales and a 10-
percent discount for discounted beer and wine sales. Petitioners
offered no reliable evidence to contradict respondent's
determinations. We conclude that Classic Pub's gross sales of
mixed drinks during 1992 and 1993 were understated by $21,888 and
$28,313, respectively, and that its gross sales of beer and wine
during 1991, 1992, and 1993, were understated by $6,361, $33,257,
and $38,147, respectively. Consequently, we hold that petitioners
understated their 1991, 1992, and 1993 taxable income by $2,165,
$69,187, and $54,661, respectively.
Issue 2. Business Automobile Expenses
The next issue is whether petitioners are entitled to deduct
$1,581 of unreimbursed automobile expenses they purportedly
incurred during 1991 in operating Classic Pub.
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Last modified: May 25, 2011