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advised him to create a paper trail of the cash withdrawals that
he was using to pay Concord. (We note that cashing checks at
other merchants, with whom he did not have an ongoing business
relationship, would both delay their presentment for payment and
not immediately result in the repossession of any of his
inventory if they bounced.)
So we find that Cox is entitled to a deduction for his cash
expenses. The parties did not stipulate the precise amount at
stake, but they did stipulate that Washington Car (or the
company’s sometime alter ego, Washington Car Rental) had receipts
for payments totaling $76,600 from Washington Car Care. Two
additional receipts show payments from Concord to Washington Car
of $10,000; however, Cox testified at trial that he mistakenly
switched the names of the companies on the “to” and “from” lines,
and that Concord never made any refund payments to the Company.
We believe Cox’s testimony that these receipts were actually for
payments made to Concord. Therefore, the total amount of the
purchases from Concord is $86,600, of which $16,100 was paid by
check. Because the Commissioner has already conceded the $16,100
paid by check, we hold that Cox should be allowed an additional
$70,500 deduction for cash purchases as a cost of goods sold.
B. Section 6662 Penalty
The only other issue for us to decide is whether the Coxes
are liable for an accuracy-related penalty. In his notice of
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