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are excepted from inventory and, alternatively, that by virtue of
its ownership and placement of model manufactured homes on the
retail sales lots ADI participates directly in the sales of the
manufactured homes to retail customers, and therefore that ADI’s
leased sales lots should be treated as “on-site” storage
facilities and the various costs in dispute should be treated as
on-site storage costs that are excepted from inventory.
Respondent argues that for ADI the costs in question do not
constitute deductible marketing, selling, or distribution costs,
and that (assuming the lot lease payments may be treated as
storage costs) the lot lease payments do not constitute “on-site”
storage costs because the manufactured homes are sold by ADI to
the independent salespersons and not “exclusively” to retail
customers.
We first address ADI’s alternative argument. As noted, the
applicable regulations relating to on-site storage costs
expressly state that to be excepted from inventory treatment on-
site storage costs must relate to property sold by a taxpayer
“exclusively” to retail customers. Sec. 1.263A-3(c)(5)(ii)(B),
Income Tax Regs.
On the record before us and although ownership of the
manufactured homes by the independent salespersons appears to be
brief and rather transitory, we are not prepared to overlook the
role of the independent salespersons who clearly have a
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