Galedrige Construction, Inc. - Page 13

          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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