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of R’s adjustments is an increase in P’s gross income
for each of the years in question in the amount of P-
delivered currency paid by vendors to member stores.
1. Held: P is not collaterally estopped from
challenging R’s adjustments by our report in Affiliated
Foods, Inc. v. Commissioner, T.C. Memo. 1996-505, affd.
in part, revd. in part and remanded 154 F.3d 527 (5th
Cir. 1998).
2. Held, further, the payments that R charges P
with making to member stores are properly characterized
as trade discounts. They were not paid with reference
to P’s net earnings but merely passed along the price
adjustments that P was entitled to on account of the
orders placed by the member stores at the food shows.
They reduce P’s gross sales and are not defective
patronage dividends.
William A. Hoy, for petitioner.
George E. Gaspar and Mark E. O’Leary, for respondent.
HALPERN, Judge: By notice of deficiency dated April 22,
2004, respondent determined deficiencies in petitioner’s Federal
income tax of $143,978, $166,493, and $11,101 for petitioner’s
taxable (fiscal) years ended September 30, 1991, October 2, 1992,
and October 1, 1993, respectively (the audit years). Petitioner
is a corporation operating on a cooperative basis (a purchasing
cooperative), whose shareholder-patrons operate retail grocery
stores. The issues for decision concern the proper treatment of
certain payments made to petitioner’s shareholder-patrons at food
shows petitioner conducted during the audit years.
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