- 19 -
Commissioner, 64 T.C. 989, 997 (1975); see also Grossman v.
Commissioner, 182 F.3d 275, 281 (4th Cir. 1999), affg. T.C. Memo.
1996-452.
Rejecting respondent’s assertion of increased income for
1985 and adjusting respondent’s calculations to account for the
1986 and 1987 losses on the Florida transactions mentioned
above,4 we conclude that petitioner’s sale of marijuana generated
the following gross receipts, cost of goods sold, and gross
profit:
1985 1986 1987
Gross Receipts $1,247,670 $279,800 $306,400
Cost of Goods Sold 659,910 259,525 147,490
Gross Profit 587,760 20,275 158,910
As indicated, under section 6653(b)(1) and (2) for 1985 and
under section 6653(b)(1)(A) and (B) for 1986, respondent
determined that petitioner is liable for additions to tax for
fraud. Respondent also determined that for 1985 and 1986
petitioner is liable for additions to tax under section 6661 for
substantial understatements of tax.
No additions to tax were determined by respondent against
Martha McHan.
4 Taking into account the 1986 and 1987 Florida loss
transactions also involved making certain other adjustments to
petitioner’s gross receipts and cost of goods sold for 1986 and
1987.
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