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mind the recent case of Hospital Corp. of Am. v.
Commissioner, 107 T.C. 116, 143-145 (1996).* * *
Majority op. p. 14.
What facts distinguish this case from those cases in which
we have held that goods utilized by a service provider were
merchandise for purposes of section 1.471-1, Income Tax Regs.? I
agree with the majority’s observations that medicine is unique,
and that it is inherently a service business. So what! Contrary
to the majority’s impression, health care providers do sell
goods. See, e.g., De Modena v. Kaiser Found. Health Plan, Inc.,
supra (drugs purchased by an HMO for resale to its members are
purchased for the HMO’s own use). The relevant distinction is
between supplies, for which inventories need not be taken, and
merchandise held for sale (merchandise), for which inventories
must be taken. Compare section 1.162-3, Income Tax Regs., with
section 1.471-1, Income Tax Regs. I agree with the majority when
it states: “The statute and regulations do not define the words
‘merchandise’ or ‘inventory’, nor do they clearly distinguish
between ‘inventory’ and ‘materials and supplies’ that are not
actually consumed and remain on hand.” Majority op. p. 12. As
previously discussed, supra section IV.A.1, it was plain error
for petitioner to treat the expenditure for the chemotherapy
drugs as an expenditure for incidental supplies, and, in terms of
properly accounting for that expenditure, it makes no difference
whether the expenditure is treated as being for merchandise or
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