Wal-Mart Stores, Inc. and Subsidiaries, (1997)
Linked as:
Extract
Wal-Mart Stores, Inc. and Subsidiaries, (1997)
T.C. Memo. 1997-1
UNITED STATES TAX COURT WAL-MART STORES, INC. AND SUBSIDIARIES, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 27022-93. Filed January 2, 1997.Ps operate retail department stores and clubs. Ps' accounting records set forth each store/club's inventory, and Ps count each store/club's inventory during the year to verify the records' accuracy. In order to reflect the "shrinkage" of inventory at yearend caused by theft, breakage, and clerical errors occurring after a count, Ps estimate this shrinkage based on gross sales. Ps' inclusion of the estimates in costs of goods sold reduces their gross income.Held: Ps' method of estimating inventory shrinkage at yearend is permissible because the method: (1) Conforms as nearly as may be to the best accounting practice in the trade or business and (2) clearly reflects income.Alexander Zakupowsky, Jr., Frederick Brook Voght, Jean Ann Pawlow, and Carol Ann Johnson, for petitioners.Albert L. Sandlin, Jr., Thomas R. Ascher, James P. Dawson, and Martin L. Osborne, for respondent.MEMORANDUM FINDINGS OF FACT AND OPINION LARO, Judge: Wal-Mart Stores, Inc., & Subsidiaries, petitioned the Court to redetermine respondent's determination of deficiencies in their Federal income tax. Respondent determined the following deficiencies:Taxable Year Ended Deficiency Jan. 31, 1984 (1983 taxable year) $9,937,545 Jan. 31, 1985 (1984 taxable year) 4,084,255 Jan. 31, 1986 (1985 taxable year) 9,381,626 Jan. 31, 1987 (1986 taxable year) 8,206,962 Following concessions by the parties, we must decide whether petitioners' estimates of inventory shrinkage at yearend are permissible. We hold they are. Section references are to the Internal Revenue Code in effect for the subject years. Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts are rounded to the nearest dollar. The term "shrinkage" refers to the excess value of book inventory over actual inventory. The term "overage" refers to the excess value of actual inventory over book inventory. The term "physical inventory" refers to the counting of the goods that are actually in inventory.FINDINGS OF FACT I. Background A. General Information Some of the facts have been stipulated and are so found. The stipulated facts and exhibits submitted therewith are incorporated herein by this reference. Petitioners comprise an affiliated group of corporations that use an accrual method of accounting for financial accounting and tax purposes. They filed Federal consolidated income tax returns and amended Federal consolidated income tax returns for the subject years. Their common parent is Wal-Mart Stores, Inc. (Parent). Parent's principal place of business was in Bentonville, Arkansas, when it petitioned the Court.At all relevant times, Kuhn's-Big K Stores Corp. (Kuhn's) and Big K Edwards, Inc. (Edwards), were two of Parent's subsidiaries, and Sam's W...See the full content of this document
Sponsored links
