- 29 -
unpersuasive: We do not see a sufficient difference between
petitioner’s control over petitioner-delivered and vendor-
provided currency that they should be treated differently, yet
that is what respondent has done. Nevertheless, we are mindful
that in affirming our prior treatment of show money in Affiliated
Foods, Inc. v. Commissioner, 154 F.3d at 533, the Court of
Appeals remarked that, by negotiating the terms of show money
payments, petitioner provided for the direct payment of moneys
from vendors to member stores that otherwise would have accrued
to petitioner as earnings. Even were we to ignore respondent’s
failure to treat petitioner-delivered and vendor-provided
currency equivalently, however, and to credit petitioner with
control over petitioner-delivered currency, we believe that
petitioner prevails for the reasons stated below.
2. Rebates
Both petitioner and the member stores are merchants. A
merchant computes its gross income from sales during a year by
subtracting from its revenue from sales the cost of the goods
sold. See sec. 1.61-3(a), Income Tax Regs. A purchase price
adjustment or a price rebate that a taxpayer receives with
respect to goods that it has purchased for resale is not, itself,
an item of gross income but, instead, is treated as a reduction
in the cost of the goods sold. See, e.g., Dixie Dairies Corp. v.
Commissioner, 74 T.C. 476, 492 (1980).
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Next
Last modified: November 10, 2007