- 18 - 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).Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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