Ward AG Products, Inc. - Page 12

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          1984) (newsprint and ink which cost 17.6 percent of the                     
          taxpayer's total receipts were a substantial income-producing               
               Ward provided many services to petitioner's customers in               
          connection with selling farm products to them.  However,                    
          businesses that provide both services and merchandise may be                
          required to use inventories.  Knight-Ridder Newspapers, Inc. v.             
          United States, supra at 790 n.16; Fred H. McGrath & Son, Inc. v.            
          United States, 549 F. Supp. 491 (S.D.N.Y. 1982) (funeral                    
          services); sec. 1.471-1, Income Tax Regs.                                   
               We conclude that buying and selling merchandise was a                  
          substantial income-producing factor for petitioner.                         
          C.   Whether Petitioner Qualified as a Farmer for Purposes of               
               Using the Cash Method of Accounting                                    
               A farming business may use the cash method of accounting to            
          compute its taxable income.  Sec. 448(b)(1).  Petitioner contends           
          that it qualifies as a farming business because it was                      
          significantly involved in the growing process and bore a                    
          substantial risk of loss from the growing process.  Maple Leaf              
          Farms, Inc. v. Commissioner, 64 T.C. 438, 448 (1975).  We                   
               For purposes of section 448(b)(1), the "farming business" is           
          the trade or business of farming.  Secs. 263A(e)(4),                        
          448(d)(1)(A).  A taxpayer is a farmer if it cultivates, operates,           
          or manages a farm for profit, either as owner or tenant.  See               

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