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industry data compiled and published by Robert Morris Associates,
and (2) information provided by petitioner and two of
petitioner’s suppliers. Petitioner does not dispute respondent’s
use of a 25-percent markup for these items. Further, petitioner
did not present any evidence to show that respondent’s
determinations were otherwise in error.
Auto Service and Repairs, Including Sale of Parts and Fluids
With respect to receipts from auto service and repairs,
including the sale of parts and fluids (e.g., oil, coolant, brake
fluid, etc.), we sustain respondent’s determinations only in
part. Although the percentage markup method is generally
acceptable, see Bollella v. Commissioner, supra, the particular
facts and circumstances of this case raise two questions: (1)
Whether respondent chose an acceptable markup percentage, and (2)
whether respondent applied the markup properly. Although we
agree with respondent’s choice of a 22.8-percent markup, we find
that respondent did not apply the markup properly and therefore
that petitioner did not receive all the income that respondent
determined.
Did Respondent Choose an Acceptable Markup?
Respondent applied a markup of 22.8 percent, which was
determined using industry data compiled and published by Robert
Morris Associates. The 22.8-percent figure represented the 1993
average gross profit for gasoline service stations with total
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