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In 1983, Mr. Emert founded and incorporated AEI, and it
commenced business. AEI is an S corporation, and Mr. Emert has
always been its sole shareholder and corporate officer. AEI
sells silicon wafers3 and printed circuit boards (the electronic
materials) to high-technology companies.
In 1986, Mr. Emert incorporated Distribution. Distribution
maintains an inventory of goods.4 Distribution and AEI have
never had any written contract describing the business
transactions between them.
During the years in issue, a typical transaction among AEI,
vendors, subcontractors, and customers occurred as follows:
Customers contacted AEI for the sale of electronic materials from
AEI to the customer.5 The customer executed a purchase order for
the purchase of electronic materials, and the customer forwarded
the purchase order to AEI. The purchase order identified AEI as
the seller and the customer as the buyer.
3 Silicon wafers are thin slices of silicon that are used
for making semiconductor devices.
4 In a small number of transactions, Distribution had goods
which subcontractors could manufacture into electronic materials
for AEI's customers. In these cases, upon AEI's acceptance of a
customer's purchase order, AEI purchased the goods for the
customer's order from Distribution, AEI shipped the goods to a
subcontractor, and the subcontractors used these goods to
manufacture electronic materials for AEI's customers.
5 AEI also solicited orders from customers.
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Last modified: May 25, 2011