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This Court has also stated similarly. See St. Luke's Hosp. v.
Commissioner, 35 T.C. 236, 238 (1960), wherein the Court stated
that the taxpayer hospital was "not a merchandising business, and
* * * has no merchandise inventories which would require the use
of an accrual method in keeping its books or reporting its
income. Its income is derived from providing hospital and
professional care to the sick."
Respondent's characterization of the chemotherapy drugs as
merchandise offends the natural and ordinary meaning of the term
"merchandise". The word "merchandise" denotes commodities or
goods that are bought and sold in business. See Merriam
Webster's Collegiate Dictionary 727 (10th ed. 1996). Although
pharmaceuticals could reasonably be construed to be merchandise
in some contexts; e.g., when purchased at a grocery store for
self-administration at home, it does not necessarily follow that
pharmaceuticals are merchandise in all contexts. The latter
proposition is especially true under the facts at hand where
petitioner's patients generally cannot be understood to consider
themselves as purchasers of "merchandise" during the course of
their medical treatment. The chemotherapy drugs are administered
by petitioner's trained, licensed, and specialized physicians and
other health-related professionals during the rendition of a
unique medical service, and, when administered, the drugs are not
"goods [that were] purchased in condition for sale," or "articles
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