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GERBER, J., dissenting: I respectfully disagree with the
majority’s conclusions that petitioner was not selling
merchandise and that respondent abused his discretion by
determining that petitioner’s use of the cash method did not
clearly reflect income. I disagree for the following reasons:
(1) Petitioner did not meet its heavier-than-normal burden of
showing an abuse of respondent’s discretion; (2) the majority’s
conclusion that the materials involved are merely an inseparable
part of petitioner’s performance of a service is not supported by
the record; (3) the majority’s holding and approach may result in
unintended preferential Federal tax treatment for a particular
industry and/or taxpayers dealing in so-called “ephemeral”
products or materials; (4) the holding in Galedrige Constr., Inc.
v. Commissioner, T.C. Memo. 1997-240, is in error, and,
accordingly, the majority’s reliance upon it is unfounded; and
(5) this case is factually distinguishable from Osteopathic Med.
Oncology & Hematology, P.C. v. Commissioner, 113 T.C. 376 (1999).
The majority sets forth the correct standards for
determining whether respondent has abused his discretion. Those
standards are summarized here to emphasize that petitioner has
failed to meet the standard expressed by the majority: The
Commissioner has broad authority to decide whether a taxpayer’s
accounting method clearly reflects income. We need only decide
whether there is adequate basis in law for the Commissioner’s
conclusion, and section 446 imposes a heavy burden on the
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