- 5 -
abused his discretion in making that determination under section
446(b). See RCA Corp. v. United States, 664 F.2d 881, 886 (2d
Cir. 1981). Consequently, at trial, petitioners had the burden
of proving that respondent’s determination was arbitrary,
capricious, or without sound basis in fact or law. See Knight-
Ridder Newspapers, Inc. v. United States, supra.
After these cases were tried but before the opinion was
issued, the Court’s opinion was filed in Osteopathic Med.
Oncology & Hematology, P.C. v. Commissioner, 113 T.C. 376 (1999),
which presented facts strikingly similar to those involved in the
present cases. In Osteopathic Med. Oncology & Hematology, P.C.,
a taxpayer, specializing in the treatment of cancer through
chemotherapy, used the cash method to expense the cost of drugs
used during treatments. The Commissioner argued that the drugs
were merchandise under section 1.471-1, Income Tax Regs., and,
therefore, the taxpayer had to use the accrual method to report
income and costs attributable to the drugs. This Court held that
the drugs were not merchandise and that the taxpayer properly
used the cash method to expense the cost of the drugs and report
income. Osteopathic Med. Oncology & Hematology, P.C., was not
appealed, and the decision became final on April 7, 2000. See
secs. 7481(a)(1), 7483; cf. Fed. R. App. P. 13(a).
In Mid-Del Therapeutic Ctr., Inc. v. Commissioner, T.C.
Memo. 2000-130 (Mid-Del I), we held that respondent’s
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011