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full credit from the corporation for the magazines and paperbacks
that they were unable to resell.
On its 1982 Federal income tax return, Ohio Periodical made
a proper election to use the provisions of section 458.2 The
election was effective for the 1982 tax year and every tax year
thereafter. For each of the years in issue, the corporation made
sales and had returns of those sales items during the merchandise
return period, defined in section 458(b)(7).3 Such sales were
2 Sec. 458. MAGAZINES, PAPERBACKS, AND RECORDS RETURNED
AFTER THE CLOSE OF THE TAXABLE YEAR.
(a) Exclusion From Gross Income.--A taxpayer who is on an
accrual method of accounting may elect not to include in the
gross income for the taxable year the income attributable to the
qualified sale of any magazine, paperback, or record which is
returned to the taxpayer before the close of the merchandise
return period.
3 Sec. 458(b)(7) reads:
(7) Merchandise return period.--
(A) Except as provided in subparagraph (B),
the term "merchandise return period" means, with
respect to any taxable year--
(i) in the case of magazines, the
period of 2 months and 15 days first
occurring after the close of taxable year, or
(ii) in the case of paperbacks and
records, the period of 4 months and 15 days
first occurring after the close of the
taxable year.
(B) The taxpayer may select a shorter period
than the applicable period set forth in
subparagraph (A).
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