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1992 in accordance with discussions that he had with Carroll and
with Conrad’s attorney about the applicability of the reasoning
set forth in Augustus v. Commissioner, 40 B.T.A. 1201 (1939),
affd. 118 F.2d 38 (6th Cir. 1941), to petitioners’ situation.
The Schedule C that was attached to the 1990 return was amended
“per Art Advisory Panel” to reflect a beginning value for the
gallery’s inventory of $36,636,630; i.e., the collection’s
undiscounted value. A Form 8275, Disclosure Statement, was
attached to the trust’s amended return for 1990 and gave the
following explanation for the change in the reported beginning
value for the gallery’s inventory:
As the result of the IRS’ audit of the estate’s 706 the
following adjustments were made:
1. The trust’s inventory was valued at
$36,636,630
* * * * * * *
The adjustments to the inventory * * * required
adjustments to previously filed returns that effected
[sic] the cost of goods sold & the operating expenses
for 1990 and in turn required the recomputation of the
1990, 1991 & 1992 NOL’s
The same explanation was given on the Forms 8275 that were
attached to the amended returns for 1991 and 1992.
By using the Panel’s undiscounted value for the collection
as its inventory value at the beginning of 1990, the gallery
increased the reported amount of its COGS for 1990, 1991, and
1992 as follows:
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