Mid Del Therapeutic Center, Inc. - Page 2

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            the Court to redetermine the respective deficiencies.  These                               
            cases were consolidated for purposes of trial, briefing, and                               
            opinion because they involve common questions of law and fact.                             
                  The deficiencies result from respondent's determination,                             
            pursuant to section 446(b),1 that petitioners must use an accrual                          
            method of accounting to report their taxable income.  The                                  
            ultimate issue to be decided is whether respondent abused his                              
            authority under section 446(b) by requiring petitioners to change                          
            from the cash receipts and disbursements method of accounting                              
            (the cash method) to the accrual method.  In order to decide that                          
            issue, we must examine the related question of whether                                     
            chemotherapy drugs and related medications (the drugs),                                    
            administered by petitioners to patients during the course of                               
            medical treatments, are merchandise which must be inventoried.                             
            We hold that the drugs in question are not merchandise and that                            
            respondent abused his discretion under section 446(b) by                                   
            requiring petitioners to change from the cash method to the                                
            accrual method of accounting.                                                              

                  1All section references are to the Internal Revenue Code in                          
            effect for the taxable years in issue, and all Rule references                             
            are to the Tax Court Rules of Practice and Procedure.  For                                 
            convenience, all monetary amounts have been rounded to the                                 
            nearest dollar.                                                                            

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Last modified: May 25, 2011