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the amount of gross receipts it shows, and petitioners have not
shown that the computerized general ledger is correct.
3. Conclusion
We conclude that petitioners had unreported income and gross
receipts in the amounts respondent determined for 1995-97.
C. Whether Petitioners Are Entitled to Larger Costs of Goods
Sold Than Respondent Allowed
Petitioners contend that respondent incorrectly calculated
their costs of goods sold for 1995-98.7 We disagree.
1. Petitioners’ Opening Inventory for 1995
Petitioners contend that their opening inventory for 1995
includes $96,000 that they paid to buy air conditioners in 1994,
which they sold in 1995. We disagree.
Mrs. King testified that she bought the air conditioners in
1994 and sold them in 1995, but she also testified that she did
not sell most of them in the year after they were bought. Mrs.
King testified that she discovered the $96,000 omission several
months before trial while reviewing records, but petitioners did
not offer those records in evidence. Under these circumstances,
it is not clear when petitioners bought or sold the air
conditioners; thus, we are not convinced that the $96,000 is
includable in petitioners’ cost of goods sold for 1995.
7 Cost of goods sold is computed by subtracting the value
of ending inventory for a year from the sum of opening inventory
for and purchases during that year. See Thor Power Tool Co. v.
Commissioner, 439 U.S. 522, 530 n.9 (1979).
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