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in the promotional accounts are not the income or property of
petitioner.
We agree with respondent. Petitioner's analysis recognizes
that the funds in the promotional accounts expended for
advertising are not taxable to petitioner; however, it fails to
take into account that the food show rebates are. The Court of
Appeals for the Fifth Circuit recognized that some of the food
show rebates came from the promotional accounts when it stated
"Vendors * * * use the funds in their promotional accounts as a
means of supplying Vendor representatives with the necessary
rebate cash." See Affiliated Foods, Inc. v. Commissioner, 154
F.3d at 529. Accordingly, the funds withdrawn from the
promotional accounts and distributed at the food shows are
taxable to petitioner.
In addition, petitioner received $60,000 and $100,000 from
Western Family Foods, Inc., for distribution at the food shows in
1989 and 1990, respectively. At trial, petitioner acknowledged
that these funds constituted income to petitioner at the time of
receipt. Petitioner was able to substantiate that $35,616 and
$82,958 of these funds were distributed to member stores at the
food shows in 1989 and 1990, respectively. Thus, we held that
petitioner was entitled to deductions in these amounts. In the
original Rule 155 computation, petitioner's income was increased
by the difference between the amount of the funds given to
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