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inflation to approximate the wholesale price in August 1993, the
percentage for petitioner’s markup would be higher. Although the
22.8-percent deemed markup rate used in respondent’s
determination is substantially higher than the 10.5-percent
markup rate that has been documented for one sale of tires,
respondent’s deemed rate is substantially lower than the markup
of at least 36.3 percent for the power steering pump. In
addition, in computing his retail price for tires and other
parts, petitioner charged lower markups for his preferred
customers, and Anco was one of his preferred customers. Thus,
the markups for which petitioner has produced any evidence were
lower than average. Upon review of the evidence he has
presented, we conclude that petitioner has failed to demonstrate
error in respondent’s use of a 22.8-percent markup rate to
reconstruct his gross sales figure. See Petzoldt v.
Commissioner, supra; Rungrangsi v. Commissioner, supra.
Did Respondent Apply the Markup Properly?
To determine petitioner’s gross profit for the years in
issue, respondent multiplied petitioner’s cost of purchases by
the 22.8-percent markup. However, petitioner has provided
evidence of at least two errors in this approach: First,
petitioner did not receive payment during the years in issue for
all of the items that he sold, due to unpaid accounts receivable;
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