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The omitted Schedule A depreciation adjustments are listed
by year in the table below.
Schedule A
Tax year
depreciation
1989 $2,333,216
1990 $1,857,056
1991 $1,955,040
1992 $2,523,597
1993 $4,924,213
On brief, petitioners explain this omission by assuming that
Mr. Kimball added back the smaller depreciation number to reflect
differences in the methods used by Belle Fourche and the public
companies to compute cost of goods sold. This explanation is
unpersuasive. First, Schedule A reports cost of goods sold
and/or cost of operations. Belle Fourche did not sell goods, it
rendered services. Therefore, the costs reported by Belle
Fourche reflected its cost of operations, which included
depreciation, amortization, operating expenses, vehicle expenses,
operating rents, fuel and power. We are aware of no accounting
method issues that would prevent Mr. Kimball from adjusting net
income for substantial depreciation deductions in order to arrive
at multiples that served as proxies for cash-flows. Second, if
such accounting method issues existed, it seems that adjustments
71(...continued)
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