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(2) whether petitioner is entitled to deduct $80,000 as an
expenditure for supplies pursuant to section 162(a), or if
required to capitalize the expenses, whether petitioner is
entitled to depreciate the $80,000 expenditure over a 7-year
recovery period under section 168(c).1
FINDINGS OF FACT
At the time the petition was filed, petitioner maintained
its business office in Wilsonville, Oregon.2
A. Background
Petitioner’s predecessor, Vitamin Village, Inc. (VVI), was
incorporated by Daniel L. Reeves (Mr. Reeves) in the State of
Oregon in 1979. VVI, an accrual basis taxpayer with an FYE June
30, was in the business of producing, distributing, and selling
skin care products, tanning lotions, diet aids, sports
performance products, nutritional supplements, health food
products, and apparel at both the retail and wholesale levels.
VVI also provided indoor tanning salon services and its own
printing, advertising, and marketing services. VVI used the
business name of Vitamin Village for the production and sales of
nutritional supplements, health food, skin care products, and
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code), as amended. All Rule
references are to the Tax Court Rules of Practice and Procedure,
unless otherwise indicated. Amounts are rounded to the nearest
dollar.
2 The parties did not file a stipulation of facts.
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