-67-
position as to what are the cost and the market for Conso-
lidated's customer cores for purposes of section 471 would not
change.
Purchase vs. Exchange Transactions
In support of petitioner's position that Consolidated
acquired customer cores in exchange transactions, petitioner
asserts:
Petitioner's method of obtaining cores from its
customers is, at its root, an exchange of a remanu-
factured automobile part for a sum of money (the
exchange amount) plus the customer's core. * * *
Respondent's attempt to characterize the core
deposit[26] as the "cost" to Petitioner of a core
provided to it by a customer is apparently founded in
Treasury Regulation 1.471-3(b) and assumes that the
core deposit is the "invoice price" of the core.
Respondent's position ignores both the absence of an
"invoice" or "invoice price" relating to a customer
core and the fundamental nature of the transaction
between Petitioner and its customer.
Petitioner's customers do not issue invoices to
Petitioner. On the sale of a remanufactured automobile
part, Petitioner issues an invoice to its customer that
reflects an exchange amount and a core deposit. * * *
The core deposit is reflected on the invoice with the
understanding that the customer can return his or her
core and receive back from Petitioner the full amount
of the core deposit shown. * * * The recording of the
core deposit on Petitioner's invoice is, therefore,
simply the posting of a customer deposit to secure the
return of the customer's core. Further, the refunding
of the core deposit and the issuance of a credit
invoice by Petitioner to a customer simply documents
26 Petitioner uses the term "core deposit" on brief
presumably because it contends that the core amount for a
customer core represents a deposit made by Consolidated's
customer to secure "the return of the customer's core", which was
to be refunded at the time that customer decided to deliver a
customer core to Consolidated.
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