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customers for a fee.
Petitioners' argument is without merit. AEI, in any given
transaction, acted as both the buyer pursuant to its contract
with the vendor or subcontractor and the seller pursuant to its
contract with its customers. California Commercial Code section
2106 provides that a "sale" consists in the passing of title from
the seller to the buyer for a price. Thus, it would be
impossible under California law for AEI to have purchased and
resold the electronic materials without title having passed from
the vendors or subcontractors to AEI and then from AEI to its
customers. See also Tebarco Mechanical Corp. v. Commissioner,
T.C. Memo. 1997-311. Additionally, the parties stipulated a
typical purchase order between AEI and its customers that
provided:
title to * * * all items shipped by Seller [AEI] to
Buyer [AEI's customers] shall pass to Buyer at the
F.O.B. point designated on the face of this Order but
only after inspection and acceptance of the goods by
Buyer in accordance with the terms of this Order. * * *
Furthermore, the purchase order warranted that AEI conveyed good
title to the electronic materials to the customer. These
provisions provide clear evidence of AEI's intentions and govern
the passage of title. See Epic Metals Corp. & Subs. v.
Commissioner, T.C. Memo. 1984-322, affd. without published
opinion 770 F.2d 1069 (3d Cir. 1985).
Petitioners also rely on Simon v. Commissioner, 176 F.2d 230
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