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Hallmark Cards, Inc. v. Commissioner, 90 T.C. 26 (1988).
Furthermore, it is title, rather than physical possession that
determines whether merchandise should be included in inventory.
Epic Metals Corp. v. Commissioner, T.C. Memo. 1984-322; see also
Hoffman v. Commissioner, T.C. Memo. 1989-154 (taxpayer's S
corporation required to accrue income from sale of ski equipment,
even though equipment had not yet been manufactured and it never
took possession); Middlebrooks v. Commissioner, T.C. Memo. 1975-
275 (magazines were considered inventory, even where publisher
held title to them only briefly).
In Middlebrooks, we noted that, aside from consideration of
the technical passage of title, the taxpayer exercised control
and ownership rights over the magazines after they had been
printed in that they were shipped in the taxpayer's name and at
his own expense. Similar to the taxpayer in Middlebrooks, the
petitioner in the instant case also has the benefits and burdens
of ownership. Here, petitioner marks up the cost of the
materials between 10 and 20 percent, acquires the materials in
its name, and the vendors look to petitioner, not the general
contractor or owner, for payment. Petitioner's argument is
further weakened by its admission that it sometimes accepts
delivery and retains possession of the merchandise it acquires.
Finally, we note that petitioner's reliance on Simon v.
Commissioner, supra, is misplaced. The facts in Simon, are
clearly distinguishable from the facts in the instant case. In
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