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Labs. v. Portland Retail Druggists Association, Inc., 425 U.S. 1
(1976), and holding: “[D]rugs purchased by an HMO * * * for
resale to its members are purchased for the HMO’s ‘own use’
within the meaning of the Nonprofit Institutions Act and thus
qualify for protection under the Act.”). Abbott Labs. is no
support for the proposition that, as a matter of law, petitioner
is not selling merchandise.
The majority also cites St. Luke’s Hosp., Inc. v.
Commissioner, 35 T.C. 236, 238 (1960), for the proposition that
petitioner is not selling merchandise when it administers
chemotherapy drugs. The principal issue in St. Luke’s Hosp.,
Inc. was whether the taxpayer, having requested and received
permission from the Commissioner to change from an accrual method
to the cash method of accounting for 1953 and thereafter,
properly reported income on the cash method when it continued to
employ primarily an accrual method in keeping its books and
records. We concluded that it did properly report income on the
cash method since, notwithstanding the taxpayer’s retention of an
accrual method, its cash-basis income could readily be
ascertained from its books and records. Our findings of fact
included the following:
Petitioner owns and operates a hospital in Bluefield.
Its business is the customary hospital service
business. It is not a merchandising business, and
petitioner 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
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