Sunoco, Inc. and Subsidiaries - Page 8

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                  The record of this case contains the separate Federal               
             income tax returns of Cordero that were included with, and               
             incorporated in, petitioner’s consolidated Federal income                
             tax returns for taxable years 1982 through 1986.  On each                
             of those returns, Cordero stated that it used the accrual                
             method of accounting.  On its separate returns for 1982,                 
             1983, 1984, and 1985, Cordero reported the costs incurred                
             in removing overburden at the Gillette mine as part of                   
             the deductions claimed for salaries and wages, repairs,                  
             depreciation, employee benefit programs, and “other                      
             deductions”, without identifying the portion of the                      
             deduction that was incurred for the removal of overburden.               
             Similarly, on its separate return for 1986, Cordero                      
             included its overburden removal costs in cost of goods                   
             sold without identifying the portion thereof that was                    
             incurred for the removal of overburden.                                  
                  Thus, for tax reporting purposes, Cordero treated                   
             overburden removal costs as deductions on its returns for                
             1982 through and including 1985, and it treated them as                  
             an offset of gross income on its return for 1986.                        
             Furthermore, Cordero reported the overburden removal costs               
             at the Gillette mine as the costs were incurred, except for              
             the portion of those costs allocated to ending inventory.                
             Cordero did not defer for tax reporting purposes the                     

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