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charge was purposely made higher than the value of the
old core to be returned, in order to induce customers
to return old cores and to enable Burrell to maintain a
needed inventory of old cores. Burrell did not
strictly enforce the 45-day limit, but accepted old
cores tendered to him for credit by customers a
considerable time after the 45-day period had expired.
The effect of a transaction between Burrell and a
customer was a charge against the customer in one
amount, reflected on the bill delivered to him, made up
of two items, one being Item One, the charge for the
rebuilt engine with a rebored core sold to the
customer, payable in cash, and which most customers
paid on receipt of the bill; and the other, Item Two,
to be paid by the return of a like core to Burrell
within 45 days, or if not returned within 45 days, to
be paid in full, in cash. The reason Burrell did not
strictly enforce the 45-day time limit was that he
preferred old cores to cash.
Burrell carried on his books an account referred
to as "Customer Core Deposits." It reflected the
amounts of Item Two charges which customers would have
to pay in cash if they failed to discharge them by the
return of an old core. * * *
On November 1, 1962, the Corporation [Engine
Rebuilders, Inc.] was organized under the laws of
Colorado. On that date, the Corporation, which was
wholly owned by the Burrells, took over the wholesale
business of Burrell. * * * The Corporation continued to
use the same billing and invoice procedures; the same
"Customer Core Deposits" account, and generally the
same bookkeeping methods that the Burrells had
followed.
Burrell v. Commissioner, supra at 683 (fn. ref. omitted). (We
shall refer to Burrell and the Corporation collectively as the
taxpayers.)
The issue in Burrell v. Commissioner, supra, was whether the
taxpayers were required to include the so-called item two charge
in income at the time they sold a rebuilt engine. Unlike the
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