- 71 - method to be reasonable.35 In fact, the method used by respon- dent resulted in an amount of total Schedule C reconstructed gross receipts for 1995 which was less than the total sales from Barbara’s Gift Shop and Barmes Wholesale for 1995 (i.e., $5,799,767) that Mr. Barmes reported to the State of Indiana in the Indiana business tangible personal property assessment return that he filed for those businesses for that year. Under respon- dent’s method of reconstructing petitioners’ 1995 Schedule C gross receipts, the gross receipts from Barbara’s Gift Shop and Barmes Wholesale for 1995 equaled only $5,107,781 (i.e., $4,217,046 (gross receipts of $4,217,062 less returns and allow- ances of $16 that were reported in petitioners’ 1995 Schedule C) plus $890,719 (unreported 1995 Schedule C gross receipts deter- mined in the notice)), which is almost $700,000 less than the total sales for Barbara’s Gift Shop and Barmes Wholesale for 1995 that Mr. Barmes reported in the Indiana business tangible per- sonal property assessment return.36 35The Court sustained a similar method of reconstructing income in Markman v. Commissioner, T.C. Memo. 1987-407. 36As respondent points out, the reasonableness of respon- dent’s method of reconstructing petitioners’ 1995 Schedule C gross receipts and the results produced by that method is also evidenced by the relationship of Schedule C gross profit to Schedule C gross receipts. The percentage of Schedule C gross profit to reported Schedule C gross receipts for 1994 was 48.2 percent (i.e., 1994 gross profit of $2,624,759 divided by total 1994 reported gross receipts of $5,445,178). If one were to use that percentage (i.e., 48.2 percent) in order to calculate 1995 (continued...)Page: Previous 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 Next
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