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paid for by the taxpayer's client, cannot in any natural or
ordinary sense be considered "held for sale" by the taxpayer.
Accordingly, considered in this context, we find that the ready-
mix concrete is a supply, not merchandise.
B. The Other Materials
Other materials under consideration in this case--the fill
sand, drain rock, and hardware items--do not share the ephemeral
physical properties of liquid concrete or the emulsified asphalt
in Galedrige Constr., Inc. Rather, they are durable like the
replacement parts in Honeywell, Inc. v. Commissioner, T.C. Memo.
1992-453. In Honeywell, Inc. we stated that the purpose for
which the property was acquired and held is determinative of
whether the property is merchandise within the meaning of section
1.471-1, Income Tax Regs. In Honeywell, Inc., we concluded that,
because replacement parts were used by the taxpayer to perform
its service contracts, the replacement parts were not acquired
and held for sale and those parts were not merchandise within the
meaning of the applicable regulation. See id. Moreover, it is
apparent that the replacement parts were indispensable and
inseparable from the service provided by the taxpayer.
We now conclude that the fill sand, drain rock, and hardware
items, like the liquid concrete, were indispensable and
inseparable from the service provided by petitioner.
First, the construction material in this case, when combined
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