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see sec. 1.263A-2(a)(1)(ii), Income Tax Regs.,5 and who bears the
risk of loss is merely one factor to consider. That a good
damaged during the printing process may cause a printer to suffer
a loss for the ink and paper used on that good (and possibly the
labor spent or value of the machinery used in applying the ink to
the paper) does not necessarily mean that the printer was the
damaged good’s owner. As a matter of fact, a reasonable printer
would most likely have factored into its price of the print job
the projected expense for damaged or nonconforming goods.6
As to petitioner’s second argument that it qualifies for
section 263A(h)’s exemption for artists and other stated
professionals, we also disagree. This exemption was not included
in section 263A as originally enacted, but was added to that
5 Sec. 1.263A-2(a)(1)(ii), Income Tax Regs., also provides
that a taxpayer may be considered the owner of property produced
even though it does not have legal title thereto.
6 Petitioner also discusses at length sec. 1.263A-3(a)(3),
Income Tax Regs. That section is inapplicable to the facts at
hand. Sec. 1.263A-3(a)(3), Income Tax Regs., provides:
(3) Resellers with property produced under
contract. Generally, property produced for a taxpayer
under a contract * * * is treated as property produced
by the taxpayer. * * * However, a small reseller is
not required to capitalize additional section 263A
costs to personal property produced for it under
contract with an unrelated person if the contract is
entered into incident to the resale activities of the
small reseller and the property is sold to its
customers. * * *
That section is inapplicable because petitioner has no resale
activities in that it is not a reseller of its paper products.
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