- 4 -
qualified sales under section 458(b)(5)4 because the corporation
had a legal obligation to adjust the price if the item was not
resold and the price was adjusted because of failure to resell.
On its Federal income tax returns for each of the years in issue,
Ohio Periodical, pursuant to section 458(b)(6),5 excluded from
gross income the amount of the qualified returns. The
corporation did not, however, make a corresponding adjustment to
cost of goods sold pursuant to section 1.458-1(g), Income Tax
Regs.
In 1994, the Commissioner issued a Notice of Final S
Corporation Administrative Adjustment for the corporation's 1985
4 Sec. 458(b)(5) reads:
(5) Qualified sale.--A sale of a magazine,
paperback, or record is a qualified sale if--
(A) at the time of sale, the taxpayer has a
legal obligation to adjust the sales price of such
magazine, paperback, or record if it is not
resold, and
(B) the sales price of such magazine,
paperback, or record is adjusted by the taxpayer
because of a failure to resell it.
5 Sec. 458(b)(6) reads:
(6) Amount excluded.--The amount excluded under
this section with respect to any qualified sale shall
be the lesser of--
(A) the amount covered by the legal
obligation described in paragraph (5)(A), or
(B) the amount of the adjustment agreed to
by the taxpayer before the close of the
merchandise return period.
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011