- 21 -
undistributed petitioner-delivered currency distinguish the facts
before us from the facts we relied on in Affiliated Foods, Inc.
v. Commissioner, supra. In the prior litigation, we found “most”
important the requirement that undistributed petitioner-delivered
currency be returned; that requirement evidenced to us
petitioner’s exercise of dominion and control over petitioner-
delivered currency.5 The return requirement ensured that
petitioner-delivered currency would either be paid to member
stores or returned to petitioner. In the present litigation, we
cannot be equally confident that petitioner-delivered currency
not returned to petitioner was paid to member stores, since
5 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), we found that amounts received from vendors and
credited to the vendors’ promotional allowance accounts were
items of gross income to petitioner when received. We were
reversed on that point by the Court of Appeals for the Fifth
Circuit. Affiliated Foods, Inc. v. Commissioner, 154 F.3d 527
(5th Cir. 1998). Respondent has made no adjustments for amounts
similarly received during the audit years, and we assume that, at
least for purposes of this case, respondent accepts the Court of
Appeals’ conclusion that vendors retained control of funds
credited to the promotional allowance accounts and receipt of
those funds did not give rise to gross income to petitioner.
Id. at 533. We assume further that an amount equal to any
petitioner-delivered currency that a vendor chose to return to
petitioner following a food show during the audit years was
either returned to the vendor or credited to its promotional
allowance account (and, therefore, petitioner retained no control
over any currency returned to it). We make those assumptions
because, for the audit years, respondent has increased
petitioner’s income by only the excess of the petitioner-
delivered currency over the amount of cash returned by vendors to
petitioner at the conclusion of the food show.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
Last modified: November 10, 2007