Suzy's Zoo - Page 1

                                   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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Last modified: May 25, 2011