Consolidated Manufacturing, Inc., M. P. Long Living Trust, Merl Philip Long, Trustee, Tax Matters Person - Page 80

                                        -80-                                          
               Based on our examination of the entire record in this case,            
          we reject petitioner's position that Consolidated acquired                  
          customer cores in exchange transactions in which Consolidated's             
          customers purchased remanufactured automobile parts from it in              
          exchange for the payment by them of the exchange amounts and                
          delivery by them of customer cores to Consolidated.  On that                
          record, we find that the substance of the transactions by which             
          Consolidated acquired customer cores were purchases in which                
          Consolidated purchased customer cores for the prices that were              
          shown in the customer core sales invoices under the column headed           
          "Cores--Price Each".                                                        
               We shall now address what the cost and the market are for              
          purposes of section 471 for the customer cores that Consolidated            
          acquired.27                                                                 
                    The Cost for Consolidated's Customer Cores                        
               For purposes of inventory accounting under section 471, the            
          cost of merchandise purchased is determined under section 1.471-            
          3, Income Tax Regs.  That section provides in pertinent part:               
                    Cost means:                                                       
                         *    *    *    *    *    *    *                              




          27  Assuming arguendo that we were to have found that                       
          Consolidated’s acquisitions of customer cores were exchanges, and           
          not purchases, our findings below as to the cost and the market             
          for Consolidated's customer cores for purposes of sec. 471 would            
          not change.                                                                 




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