Consolidated Manufacturing, Inc., M. P. Long Living Trust, Merl Philip Long, Trustee, Tax Matters Person - Page 77

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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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