Von Euw & L.J. Nunes Trucking, Inc. - Page 4

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          contract amount.  If a customer requests only that petitioner               
          transport the sand and gravel, petitioner charges the customer              
          petitioner’s costs for transporting the sand and gravel and                 
          petitioner’s related profit for transporting the sand and gravel.           
               Petitioner acquires the sand and gravel from various                   
          suppliers.  During petitioner’s 1994 taxable year, 20 different             
          entities (20 suppliers) provided petitioner with 60 percent                 
          (evaluated by weight in tons) of its sand and gravel needs, while           
          the Unimin Corp. (Unimin) supplied petitioner with the remaining            
          40 percent.                                                                 
               Unimin processes and sells a high grade of sand used                   
          primarily in the production of wine bottles.  Processing this               
          high grade of sand produces a byproduct consisting of water and a           
          lower grade of sand, known as Byron sand.  After the water is               
          removed from the byproduct, the Byron sand can be used by                   
          petitioner’s customers.  Because petitioner must provide and                
          maintain all the equipment and personnel necessary to filter,               
          gather, and remove the Byron sand from Unimin’s processing plant,           
          Unimin charges petitioner a lower amount than what the 20                   
          suppliers charge for the same grade of sand.  When petitioner               
          computes the cost to acquire 1 ton of the Byron sand, petitioner            
          includes its costs in filtering, gathering, and removing the                
          Byron sand from Unimin’s processing plant as well as the amount             
          that Unimin charges petitioner for the Byron sand.                          

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Last modified: May 25, 2011