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(l) On their personal income tax return for the
tax year ended December 31, 1995, petitioners reported
on Schedule C total gross receipts or sales of
$4,217,062.00 for Barbara’s Gift Shop and Barmes Whole-
sale conducted at 120 Main Street in Vincennes, Indi-
ana.
(m) Petitioners have continued to control the
operations of their businesses, Barbara’s Gift Shop and
Barmes Wholesale, since the creation of the Sandbar
Wholesale Trust in October 1995.
(n) In the notice of deficiency, respondent
determined that petitioners understated their net
taxable income from their operation of Barbara’s Gift
Shop and Barmes Wholesale for the tax year ended Decem-
ber 31, 1995 by $890,719.00.
(o) Based on the adjustment of $890,719.00 to net
profit for the tax year 1995 from petitioners’ opera-
tion of Barbara’s Gift Shop and Barmes Wholesale,
respondent determined that petitioners had a net profit
of $793,881.00,[9] not a net loss of $96,883.00, as
claimed by petitioners.
(p) Utilizing the net profit percentage based on
total sales from petitioners’ 1994 personal income tax
return of 13.83%, respondent determined petitioner’s
total sales for 1995 to be $5,740,282, as follows:
9Par. 7(o) of respondent’s answer contains a mathematical
error. As corrected, such par. should read as follows:
(o) Based on the adjustment of $890,719.00 to net
profit for the tax year 1995 from petitioners’ opera-
tion of Barbara’s Gift Shop and Barmes Wholesale,
respondent determined that petitioners had a net profit
of $793,836.00, not a net loss of $96,883.00, as claim-
ed by petitioners.
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