Herbert C. Haynes, Inc. - Page 18

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          J.P. Sheahan Associates v. Commissioner, T.C. Memo. 1992-239.               
          Possession of title to goods, even if only for an instant, is               
          sufficient to require a taxpayer to inventory the goods.                    
          Addison Distrib. Inc. v. Commissioner, T.C. Memo. 1998-289;                 
          Middlebrooks v. Commissioner, T.C. Memo. 1975-275; see also sec.            
          1.471-1, Income Tax Regs.                                                   
               Petitioner stipulated that it acquired the purchased wood.             
          Petitioner stipulated that it sold the purchased wood it                    
          acquired.  We have also found that petitioner bought and sold               
          the wood it cut on land owned by unrelated entities.  The terms             
          of a typical contract between petitioner and a mill state:                  
               For the period and upon the terms and conditions                       
               hereinafter set forth, SELLER undertakes and agrees to                 
               sell and deliver unto PURCHASER, and PURCHASER                         
               undertakes and agrees to purchase and accept from                      
               SELLER, those certain quantities of pulpwood,                          
               sawtimber, poles and piling (herein called “wood”) as                  
               are hereinafter more particularly set forth and                        
               described.                                                             
               Petitioner obtains title to the wood before it sells it to             
          the mills.  See Me. Rev. Stat. Ann. tit. 11, sec. 2-401 (West               
          1995) (passage of title).  For petitioner to purchase and resell            
          the wood, title had to pass from the logger who cut the wood to             
          petitioner and then from petitioner to the mill.  See also                  
          Tebarco Mech. Corp. v. Commissioner, T.C. Memo. 1997-311.                   
               Petitioner’s income tax returns indicate that its product              
          or service was “pulpwood and logs”.  The logs are not consumed              
          by petitioner in its business.  Petitioner has not asserted that            





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