Mid Del Therapeutic Center, Inc. - Page 19

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            that, under their view, the regulations requiring use of the                               
            accrual method are inapplicable.  We agree with petitioners that                           
            their drugs are not merchandise.                                                           
                  The term "merchandise" as used in section 1.471-1, Income                            
            Tax Regs., encompasses goods purchased in condition for sale,                              
            goods awaiting sale, articles of commerce held for sale, and all                           
            classes of commodities held for sale.  See Wilkinson-Beane, Inc.                           
            v. Commissioner, 420 F.2d 352, 354-355 (1st Cir. 1970), affg.                              
            T.C. Memo. 1969-79.  Thus, items are merchandise if held for                               
            sale.  See id.                                                                             
                  We recently held in a Court-reviewed opinion that                                    
            chemotherapy and other drugs, when used in the course of treating                          
            patients, are not held for sale and, therefore, are not                                    
            merchandise.  See Osteopathic Med. Oncology & Hematology, P.C. v.                          
            Commissioner, 113 T.C. 376 (1999).  In Osteopathic Med. Oncology                           
            & Hematology, P.C., our holding was premised on our conclusion                             
            that the chemotherapy drugs and ancillary medications were both                            
            inseparable from the medical services provided to patients by the                          
            taxpayer and subordinate to the medical services provided.  See                            
            id. at 384-385.                                                                            
                  As in Osteopathic Med. Oncology & Hematology, P.C., the                              
            furnishing of drugs and other medical supplies in this case is                             
            inseparable from and subordinate to the medical services provided                          
            by petitioners to their patients.  See id.  Patients come to the                           
            clinics to receive medical treatment from Dr. Ishmael, not to                              

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