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The second adjustment to Beaufort Leaf's 1990 and 1991
returns that was made by respondent in the subject notices
of deficiency is the disallowance of certain purchases
included as cost of goods. The explanation of that
adjustment in the notices of deficiency is as follows:
The amount of $1,057,163.00 and
$2,173,562.00 [sic] shown on your respective
1990 and 1991 tax returns as tobacco purchases
is reduced by $429,421.00 and $1,173,203.00
because it has not been established that any
amount more than $627,742.00 and $1,000,359.00
was for an ordinary and necessary business
expense, or was expended for the purpose
designated. Therefore, the partnership
income is increased $429,421.00 in 1990 and
$1,173,203.00 in 1991.
We note that Beaufort Leaf's 1991 return includes purchases
of $2,713,562.46 in computing cost of goods sold, rather
than "$2,173,562.00", as stated in the notices of
deficiency. Set out below is a list of the date, check
number, payee, and amount of each check disallowed by
respondent:
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