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In order to compute gross income, gross receipts are reduced
by cost of goods sold. Sec. 1.61-3(a), Income Tax Regs. A
taxpayer must show his entitlement to the cost of goods sold
claimed and keep sufficient records to substantiate such cost.
See sec. 1.6001-1(a), Income Tax Regs.; see also Rule 142(a).
In support of petitioner’s position with respect to the cost
of goods sold at issue, petitioner contends that the following
canceled checks, cashier’s checks, and credit card charges
represented amounts paid to the payees shown below in order to
acquire certain merchandise for resale in UVW’s business:
77(...continued)
We disagree. We have found that, pursuant to Rule 37(c), peti-
tioner is deemed to have admitted the affirmative allegations in
that amendment to answer relating to the claimed cost of goods
sold for 1993.
Petitioner did not raise as an issue in petitioner’s further
trial memorandum, presented no evidence at trial and at further
trial, and makes no argument on brief as to certain amounts of
claimed cost of goods sold disallowed for 1991, 1992, and 1993
that petitioner placed in dispute in the petition and that
respondent has not conceded. We conclude that petitioner has
abandoned contesting those disallowed amounts of claimed cost of
goods sold. See Rybak v. Commissioner, 91 T.C. at 566 n.19.
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