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respect to 1996 sales activity, and some buy-down checks received
in 1998 contained payments with respect to 1997 sales activity.
Nick’s Liquors also accepted or honored paper coupons
presented by customers. Petitioner submitted the coupons to each
cigarette manufacturer for reimbursement of the face value of the
coupon, plus postage costs.
Petitioner reported $653,164 in coupon and buy-down income
on his 1997 Federal income tax return. During the audit
examination, petitioner provided respondent with four worksheets5
detailing coupon and buy-down and rack and promotional income.
Each worksheet included summary totals for all four stores. One
worksheet reflected coupon and buy-down income totaling $777,848,
while the remaining worksheets reflected a total of $521,695.
To protect the Government’s interest, the revenue agent
based her examination on the worksheet that reflected $777,848 of
coupon and buy-down income. Despite requests by the revenue
agent, petitioner did not furnish respondent with adequate
records to substantiate the amount of coupon and buy-down income
recorded by each store on a daily, monthly, or annual basis.
5 The record is unclear as to why petitioner provided four
separate summary worksheets to the revenue agent. Petitioner did
not adequately explain why they were substantially similar with
one inconsistency as to the total.
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Last modified: May 25, 2011