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estate may use an inventory method of accounting for its
development costs. The revenue ruling and the cases cited
therein make the situation that the ruling addresses very clear.
Petitioner is not in the business of developing and selling real
estate; thus, this ruling is materially distinguishable on its
facts and not relevant to petitioner's situation. See sec.
1.6661-3(b)(3), Income Tax Regs.
Similarly, we accord no weight to petitioner's reliance on
Rev. Rul. 59-329, supra, as substantial authority. Rev. Rul. 59-
329 addresses the issue of whether a taxpayer who, under section
1.451-3, Income Tax Regs., accounts for its long-term contracts
on the completed contract method, or who has accounted for both
its long-term and its short-term contracts on the completed
contract method for several years, may consider as inventory the
costs of materials, labor, supplies, depreciation, etc., with
respect to such contracts. Under the facts of Galedrige I, it is
evident that petitioner has no long-term contracts; thus this
ruling is not substantial authority for the position it took on
reporting its income.
We noted in Galedrige I that "The statute and regulations do
not define 'merchandise' or 'inventory', nor do they clearly
distinguish between 'materials and supplies' that are not
actually consumed and remain on hand, and inventory."
Furthermore, we acknowledged that "the authorities in this area
are not easily reconcilable." However, we stated that
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