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a number of commentators had urged the Secretary to omit the cost
of goods sold adjustment. The provision was retained, the
preamble explains, because the language of section 458(a)
indicates that the exclusion is determined on the basis of gross
income, which for a seller of merchandise is defined in section
1.61-3(a), Income Tax Regs., as sales revenue less cost of goods
sold, and because, in the Secretary's opinion, the cost of goods
sold adjustment is necessary to clearly reflect income in
accordance with section 446(b). 57 Fed. Reg. 38595.
Discussion
Congressional Intent With Respect to Cost Issues
We must decide whether the correlative cost of goods sold
adjustment required by the Regulation contravenes the statute.
"Under the test articulated in Chevron U.S.A. v. Natural Res.
Def. Council, 467 U.S. 837 (1984), the first question a court
must ask when reviewing an agency's construction of a statute is
whether Congress has directly spoken to the precise question at
issue and has expressed a clear intent as to its resolution."
Western Natl. Mut. Ins. Co. v. Commissioner, 102 T.C. 338, 359
(1994), affd. F.3d (8th Cir., Sept. 1, 1995); NationsBank
v. Variable Annuity Life Ins. Co., 513 U.S. , , 115 S. Ct.
810, 813-814 (1995).
Petitioners contend that Congress has directly spoken to the
precise question at issue in these cases. Petitioners' main
argument runs as follows. Section 458(a) provides for an
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