-65-
Petitioner further asserts that even if the Court were to
find that the transactions by which Consolidated acquired
customer cores were purchases, and not exchanges, only the
respective fair market values of those cores are the cost and the
market for purposes of section 471 and that the alleged excesses
24(...continued)
did not pass inspection at Bishop Engine's place of
business] that core suppliers do not ordinarily
purchase from salvage yards, except at scrap value.
Thus, for a substantial number of the cores received by
* * * Consolidated from its customers, the fair market
value of such cores is, as correctly reported on its
1990 and 1991 federal income tax returns, scrap value.
* * * [Citations omitted.]
Assuming arguendo that fair market value were the proper
criterion under sec. 471, petitioner's position regarding what
the fair market values of its customer cores were appears to be
inconsistent. On the one hand, petitioner contends that the
salvage yard cost for non-bin salvage yard cores "should be
determinative of the actual value of" Consolidated's customer
cores. On the other hand, petitioner asserts that "Mr. Bishop
* * * testified that the" customer cores of the type acquired by
Consolidated are comparable to bin salvage yard cores which did
not pass inspection at Bishop Engine's place of business and
which were purchased by core suppliers from salvage yards at
scrap value. Consequently, according to petitioner "for a
substantial number of" Consolidated's customer cores, the fair
market value was scrap value. In any event, even assuming
arguendo that we were to agree with petitioner that either the
salvage yard cost for non-bin salvage yard cores or the scrap
value for bin salvage yard cores which did not pass inspection at
Bishop Engine's place of business is the determinant of the cost
and the market for customer cores for purposes of sec. 471, which
we do not, petitioner has not established either what those
amounts were or that, "for a substantial number" of customer
cores, those amounts did not exceed scrap value. Moreover,
petitioner concedes that at least with respect to other than "a
substantial number" of Consolidated's customer cores,
Consolidated erred when it included in its returns those cores in
its unprocessed raw materials inventory and in its goods in
process inventory at scrap value.
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