- 65 -
P.C., presents a situation where the conclusion that the drugs
are consumed in the performance of a service is easier to make.
Clearly, no product resulted from the administration of drugs
into patient’s bodies.
The purchase of materials and construction of them into
finished products in this case is not easily transformed into
being “an indispensable and inseparable part” of a service.
Majority op. p. 19. As already explained in this dissenting
opinion, petitioner purchased materials and sold them to
customers in the form of a finished product. The very reasons
for finding the drugs to be supplies consumed in performing a
service in Osteopathic Med. Oncology & Hematology, P.C., are the
antithesis of the circumstances presented in this case where
finished products result from petitioner’s labors.
(2) Whether Respondent Abused His Discretion
Finally, the majority in this case finds irrelevant the fact
that petitioner had accounts receivable of $294,436 for its very
first year, in which it reported $64,806 of taxable income under
the cash method. The majority relies on section 448 for its
conclusion that petitioner’s failure to meet the substantial-
identity-of-results test is irrelevant because that section
allows certain taxpayers to use the cash method and/or not
maintain inventories. The majority also finds significant the
holding in Ansley-Sheppard-Burgess Co. v. Commissioner, 104 T.C.
367, 377 (1995).
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