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peas, carrots, truffles, and boeuf being integral to that
service? What about the proliferation of dot.com businesses,
whose added value is generally some service, such as the ability
to shop at home for merchandise, such as books or music, that
used to require a trip to the store? I fear that our new rule
may be misunderstood.3
III. Conclusion
Leslie J. Schneider, in his treatise, Federal Income
Taxation of Inventories, writes: “Notwithstanding the fact that
the inventory issue is raised in a variety of contexts, the issue
is resolved by a consideration of the same basic question-–is the
production, purchase or sale of merchandise an income-producing
factor?" Schneider, supra at 1-12. I would take into account
the traditional factors to determine whether petitioner’s method
of accounting clearly reflects its income. For many of the
reasons stated by Judge Gerber, I would conclude that it does
not.
COHEN, RUWE, GERBER, and THORNTON, JJ., agree with this
dissenting opinion.
3Indeed, I am not that sure how well the majority
understands it. The majority’s discussion of the integral
relationship of the materials to petitioner’s service relies on
an old-style factor analysis. Judge Gerber, in his dissent, does
a good job of criticizing that analysis.
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