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tortillas, fried pies, doughnuts, bagels, brown and serve rolls and
English muffins.
Petitioner began its policy of donating unsold 4-day-old bread
and claiming a deduction based on its full retail price in 1983.
Prior to 1983, petitioner removed, or "pulled," bread from its
shelves two days a week--Mondays and Thursdays. Prior to 1983,
petitioner offered its pulled bread for sale, which included three,
4- and 5-day-old bread (depending on the pull day), on discount
racks. Bread that did not sell after being on the discount rack for
24 hours was either destroyed or donated. Under petitioner's pre-
1983 policy the pulled bread was discounted approximately 50
percent, for one day only, before it was discarded or donated.
Regional and national bakers, such as Continental (Orowheat),
Kilpatrick's, and Campbell-Taggertt (Wonder Bread), which have a
substantial share of the California pan bread market, sell their pan
bread, after that bread is pulled from the retail selling shelves of
supermarkets and other retailers, at thrift or bakery outlets at
discounts ranging from 20 to 70 percent.
Petitioner's donations of bakery products to charitable
organizations were "qualified contributions" of inventory under
section 170(e)(3)(A) and section 1.170A-4A(b), Income Tax Regs. The
retail price of the contributed bakery inventory for purposes of
section 170(e)(3)(B) was $3,081,204 for TYE February 3, 1985, and
$6,072,353 for TYE February 2, 1986.
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