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petitioner is a common law employee of IBC. As a common law
employee, petitioner is not entitled to be classified as a
statutory employee as that term is described in section
3121(d)(3)(A).
C. Whether Petitioner Is Entitled to a Deduction in Arriving at
Gross Income for Returned Merchandise
In arriving at gross receipts on his Schedule C, petitioner
reduced gross receipts by $6,170 and $6,012, for 1997 and 1998,
respectively, as “cost of goods sold”. Petitioner relies on
section 458 and the case of Hachette USA, Inc. v. Commissioner,
105 T.C. 234 (1995), as support for his claimed reductions to
gross receipts.
Section 458 is an elective provision that permits the
exclusion from gross income of amounts refunded by the taxpayer
upon the return of specified merchandise, i.e., a magazine,
paperback, or record, if the taxpayer is on the accrual basis of
accounting and in the business of selling such goods. Respondent
contends that petitioner is not entitled to use section 458
because petitioner: (1) Was not in the business of distributing
or selling magazines, paperbacks, or records, (2) was not on the
accrual method of accounting, (3) did not own the products
delivered, and (4) did not maintain inventories.
We agree with respondent and hold that petitioner is not
entitled to any cost of goods sold adjustment for 1997 or 1998.
The union agreement expressly provides that petitioner had no
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