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Commissioner, T.C. Memo. 1992-239. We have previously examined
service transactions in a variety of industries to determine
whether the transactions in substance involved solely the sale of
a service, or whether the transactions involved the sale of both
a service and merchandise. Those cases are not readily
reconcilable and underscore the fact-intense nature of this
inquiry.3 We have not, however, explored this issue in the
context of the health care industry and have never had a
situation where, as here, applicable laws would prohibit the
taxpayer from selling the items in issue without provision of the
attendant service.
We find the instant setting distinguishable from the setting
of those cases in which we have held that goods utilized by a
service provider were merchandise for purposes of the inventory
rules. We give significance to the uniqueness of the industry in
3 See, e.g., Addison Distribution, Inc. v. Commissioner,
T.C. Memo. 1998-289 (electronic materials were merchandise);
Thompson Elec., Inc. v. Commissioner, T.C. Memo. 1995-292
(electrical contractor’s wire, conduit, and electrical panels
were merchandise); Honeywell Inc. v. Commissioner, T.C. Memo.
1992-453 (rotable spare parts used in maintenance service
business were not merchandise; Court rejected argument that
taxpayer’s “consideration” of the parts' cost to set its fixed
fee established that the parts were acquired and held for sale),
affd. without published opinion 27 F.3d 571 (8th Cir. 1994); J.P.
Sheahan Associates, Inc. v. Commissioner, T.C. Memo. 1992-239
(contractor’s roofing materials were merchandise); Surtronics,
Inc. v. Commissioner, T.C. Memo. 1985-277 (electroplating metals
were merchandise); Wilkinson-Beane, Inc. v. Commissioner, T.C.
Memo. 1969-79 (funeral business’ caskets were merchandise), affd.
420 F.2d 352 (1st Cir. 1970).
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