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method does not clearly reflect petitioner’s income. On brief,
however, respondent’s argument as to why petitioner's use of the
cash method does not clearly reflect income articulates that the
chemotherapy drugs are merchandise that must be inventoried.
Respondent does not dispute that petitioner's use of the cash
method clearly reflects income to the extent that the
chemotherapy drugs are not merchandise. We need not and do not
engage in further analysis of the clear reflection of income
standard of section 446.6 See Concord Consumers Housing v.
Commissioner, 89 T.C. 105, 106 n.3 (1987); Estate of Fusz v.
Commissioner, 46 T.C. 214, 215 n.2 (1966). Based on the
foregoing, we hold that respondent abused his discretion in
requiring petitioner to use the hybrid method and that petitioner
may report all its income and expenses under the cash method.
We have considered all arguments in this case for a contrary
holding and, to the extent not discussed above, find those
6 We are mindful of Asphalt Prods. Co. v. Commissioner, 796
F.2d 843 (6th Cir. 1986), affg. in part and revg. in part Akers
v. Commissioner, T.C. Memo. 1984-208, revd. on another issue 482
U.S. 117 (1987), wherein the Court of Appeals for the Sixth
Circuit held that the taxpayer’s method of accounting did not
clearly reflect its income. The setting of Asphalt Prods. Co. is
distinguishable from the setting at hand. The issue there was
not the issue before us today; i.e., whether the furnishing of
pharmaceuticals by a medical treatment facility as an integral,
indispensable, and inseparable part of the rendering of medical
services is the sale of "merchandise" for purposes of section
1.471-1, Income Tax Regs. That case also involved primarily a
significant accumulation of accounts receivable at yearend and
neither involved nor addressed whether the disputed items of
inventory (asphalt) were merchandise in the first place.
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