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Cir. 1986), affg. T.C. Memo. 1985-148; C.A. White Trucking Co. v.
Commissioner, 601 F.2d 867, 869 (5th Cir. 1979), affg. T.C. Memo.
1977-6. Therefore, petitioners were required to substantiate
claimed deductions for cost of goods sold in excess of the amount
respondent allowed. See, e.g., Manning v. Commissioner, T.C.
Memo. 1995-408; Wright v. Commissioner, T.C. Memo. 1993-27;
Danner v. Commissioner, T.C. Memo. 1992-385; Chagra v.
Commissioner, T.C. Memo. 1991-366, affd. without opinion 990 F.2d
1250 (2d Cir. 1993).
A. Petitioners' Initial Arguments
Petitioners argue that Raymond did not make any profit from
his activity. They assert that the members of the buyers group
paid the same amount for the supplies that Raymond had paid to
acquire the goods. Respondent's agent confirmed that Raymond
sold the goods to the buyers group at cost.
Petitioners argue that since Raymond did not make a profit
from the buyers group activity, there was no income omitted on
their returns. The flaw with petitioners' argument, however, is
that Raymond used the checking accounts for other transactions
besides the buyers group purchasing activity. For example,
although the transaction with Dietz and Megacards was unrelated
to the bulk buying for the buyers group, Raymond deposited the
payment from Megacards into and paid Dietz from the Ameritrust
account. It is also apparent to the Court that Raymond used the
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