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maintain inventories, petitioner relies heavily on Simon v.
Commissioner, 176 F.2d 230 (2d Cir. 1949) (buyer and seller of
paper box-board maintained no inventory, and was not engaged in
business of "merchandising" requiring use of accrual method in
computing income for Federal income tax purposes), and stresses
the fact that generally it does not take physical possession of
any materials it orders. Petitioner further argues that its
practices are consistent with industry customs in that other
subcontractors never take title to assigned materials, which they
provide to their customers for a particular job.
We find petitioner's argument without merit; not only does
it lack factual support in the record, but it fails to provide a
defense for petitioner's refusal to account for inventories.
Petitioner argues in a circular fashion that pursuant to section
1.471-1, Income Tax Regs., it need not maintain inventories,
because it never had merchandise held for sale as all materials
it acquires are instantaneously applied to a contract,
segregated, and sold. Under the facts discussed herein, however,
petitioner, in any given transaction, acts as both the buyer
pursuant to its contract with the vendor, and the seller pursuant
to its contract with the general contractor. In relying on
section 1.471-1, Income Tax Regs., and Ga. Code Ann. sec. 11-2-
401, however, petitioner fails to address this critical fact.
Moreover, we note that petitioner could have changed the nature
of its position as one of "buyer" by describing in the contracts
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