- 70 -
clients. The bottom line is that petitioner did not
hold merchandise for sale and there simply was no sale
of merchandise between petitioner and its clients. See
Osteopathic Med. Oncology & Hematology, P.C. v.
Commissioner, supra [113 T.C. 376 (1999)]; Honeywell,
Inc. v. Commissioner, supra [T.C. Memo. 1992-453].
[Majority op. pp. 33-34]
The majority recognizes that petitioner provides a mix of
goods and services. Rules of law to decide whether taxpayers
providing a mix of goods and services are producing, purchasing,
or selling (without distinction, selling) merchandise that is an
income-producing factor have proved elusive. See Schneider,
Federal Income Taxation of Inventories, sec. 1.02, particularly
at 1-13 through 1-26 (2000). The majority has attempted to craft
such a rule of law. The majority looks to Osteopathic Med.
Oncology & Hematology, P.C. v. Commissioner, 113 T.C. 376 (1999),
which applies a rule of law of questionable, but narrow,
application; viz, that medical practice is inherently a service
business. The majority extracts from that case the dubious
proposition that we can define the inherent nature; i.e., define
the essential constituent, of a service business.1 The majority
would test for that constituent as the principal determinative of
whether a business is selling merchandise. The majority has
disregarded precedent and, in my opinion, left the law less
settled than before.
1Inherent means: “Existing as an essential constituent or
characteristic; intrinsic.” The American Heritage Dictionary 928
(3d ed. 1992).
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