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amounts petitioner was owed (customer overpayments) constitute
gross income in the year of receipt.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
FINDINGS OF FACT
The stipulation of facts and the accompanying exhibits are
incorporated by this reference. Petitioner is an Arizona
corporation whose principal place of business was in Phoenix,
Arizona, at the time the petition in this case was filed. During
the years at issue, petitioner used the accrual method of
accounting for tax reporting purposes.
Petitioner’s Business
Petitioner’s business involved the manufacture, sale, and
distribution of health care marketing materials, health care
educational materials, and clinical and infection control
products. Petitioner’s client base consisted of dental offices,
veterinary clinics, and other health care professional offices
located throughout the United States and Canada. During the
years at issue, petitioner served approximately 55,000 customers.
The majority of petitioner’s business marketing was
conducted through mail-order catalogs. Petitioner took orders
for its products through the mail, over the telephone, and
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