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Promotional Accounts
During the years at issue, manufacturers provided vendors
with promotional funds, which were sometimes referred to as
"street money". These promotional funds were to be used by the
vendors to increase retail sales. Many vendors deposited their
promotional funds with petitioner. Petitioner then deposited
these funds into its Amarillo account. Petitioner did not
maintain separate accounts for the promotional funds; the
promotional funds were commingled with its general operating
funds.
Although petitioner commingled the promotional funds with
its general operating funds, petitioner maintained promotional
fund accounting records. Petitioner furnished each vendor with a
statement regarding its receipts and disbursements of promotional
funds. Petitioner did not charge vendors a fee for maintaining
these accounting records. We shall refer to these promotional
funds and the associated accounting records as vendor promotional
accounts.3
3 Although these promotional funds and associated accounting
records are variously defined in the record as "record funds",
"promotional allowance accounts", etc., we will use the term
"promotional accounts". We use this term and any reference to
payments, deposits, receipts, or deductions related to the
promotional accounts for convenience only. The substantive
Federal tax characterization of these accounts and the
transactions related to these accounts are legal issues that we
address in the Opinion section of this case.
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