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fertilizer ingredient is calculated. This calculation accounts
for the amount of fertilizer ingredient paid for but never
received by the consumer. Second, the value of the deficient
fertilizer ingredient is multiplied by a factor of 3 (2 in
Virginia). We conclude that the legislatures intended this
calculation to account for the reduced crop yield to the
consumer, despite the fact that reduced crop yield may be
difficult, if not impossible, to measure. In so doing, the
respective legislatures were attempting to compensate for the
consumer's actual loss. See Middle Atl. Distribs. v.
Commissioner, 72 T.C. at 1145.
Respondent argues that the payments at issue had no, or a
negligible, compensatory element because the vast majority of the
payments were made to the respective States and not the consumer.
We do not find respondent's argument persuasive. The inability
of the departments of agriculture to identify the consumer of the
deficient fertilizer and the difficulty in effectuating the
legislation does not alter the legislative intent.
Respondent relies on specific provisions of the fertilizer
law to argue that the payments in question were designed to
enforce the law and to punish its violation. Respondent cites
the North Carolina legislature's statement that "it is in the
public interest that the State regulate activities" of commercial
fertilizer companies. N.C. Gen. Stat. sec. 106-672 (1993).
Respondent also highlights the commissioner of agriculture's
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