- 15 -
published opinion 770 F.2d 1069 (3d Cir. 1985). Therein, we held
that the Commissioner did not abuse his discretion in requiring a
taxpayer to use the accrual method of accounting where the
taxpayer ordered materials for each job and sold custom-
fabricated metal decking. We reasoned that the taxpayer's
possession, even momentarily, of title to the metal decking was
sufficient to require the use of inventories and the use of the
accrual method of accounting.
Further, respondent relied upon our holding in Thompson
Elec., Inc. v. Commissioner, supra, and Wilkinson-Beane, Inc. v.
Commissioner, T.C. Memo. 1969-79, affd. 420 F.2d 352 (1st Cir.
1970), where we held that if the cost of material that a taxpayer
uses to provide a service is substantial compared to the
taxpayer's receipts, the material is an income-producing factor.
Although we need not decide the substantive issue in these
cases, we think that respondent's position was sufficiently
supported by the facts and circumstances in petitioners' cases
and the existing legal precedent. See Pierce v. Underwood, 487
U.S. 552 (1988). Respondent's position was reasonable in fact
because respondent reasonably inferred that IC "held" goods for
sale and that such goods were an income-producing factor in IC's
business. Respondent's position was reasonable in law because
respondent reasonably relied upon existing legal precedent that,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011