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currency” and “vendor-check currency” to refer to petitioner-
delivered currency attributable to the former and the latter of
those sources, respectively.
While, in the notice of deficiency, respondent explained
that his adjustments to petitioner’s Federal income tax for the
audit years were based on his determination that petitioner’s
“food show distributions” to its shareholders are income to
petitioner (and nondeductible patronage dividends paid to its
members), respondent did not explain how he computed those
adjustments. The parties have stipulated respondent’s method of
computation:
Respondent increased Petitioner’s taxable income
in each of the years in issue by an amount equal to the
difference between: (a) the sum of (i) the cash amounts
withdrawn from the Promotional Allowance Accounts and
(ii) the checks delivered to Petitioner by Vendors
* * * in anticipation of the Food Shows, over (b) the
cash returned to the Petitioner at the conclusion of
the Food Shows by the same Vendors * * * .[4]
We shall first address respondent’s claim that petitioner is
precluded from challenging respondent’s adjustments. Since we
believe that petitioner is not so precluded, we shall then
address the parties’ other claims.
4 The parties’ stipulation repeats the explanation as
follows: “Respondent’s adjustment to Petitioner’s income for the
years in issue is, therefore, the difference between the checks
and withdrawals from the Promotional Allowance Accounts provided
by Vendors * * * to Petitioner reduced by the cash returned by
the Vendors * * * at the conclusion of the Food Shows.”
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