114 T.C. No. 1
UNITED STATES TAX COURT
SUZY’S ZOO�, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9423-98. Filed January 6, 2000.
P, a corporation the stock of which is owned 84
percent by S and 16 percent by two individuals
unrelated to S, sells greeting cards and other paper
products bearing an image of one or more of P’s
licensed cartoon characters. P’s employees develop and
draw the originals of all of the characters, and P
transfers the original drawings to independent printing
companies to reproduce images of the drawings onto P’s
paper products, which are made by the printers on P’s
behalf. The printers must reproduce the drawings and
make the products in accordance with P’s
specifications, and they may not sell to a third party
either P’s original drawings, or reproductions thereof,
or P’s paper products.
Held: P produces, rather than resells, its paper
products; thus, P does not qualify for the “small
reseller” exception to the uniform capitalization
(UNICAP) rules of sec. 263A, I.R.C.
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