Masonry Magazine October 1988 Page. 16
Tax Matters
continued from page 11
PLANNING... 153 Ways to Win AFTER TAX REFORM ($24). Both Reports may be ordered for $39. Write to Book Division, Blackman Kallick Bartelstein, 300 South Riverside Plaza, Chicago, IL 60606.
Inventory Gambit Fails
Business owners are always trying new ways to reduce their tax burden. In this case the taxpayer attempted to establish a loss by selling inventory to a company that would keep it until the taxpayer wanted to repurchase it (TAM 8811001).
Here are the facts: Sellco "sold" excess inventory as scrap to Buyco, a company that bought and sold slow-moving items. Buyco did not refuse to buy any parts offered by Sellco. Later Sellco repurchased some of the parts at prices that were much higher than scrap value and claimed losses.
The losses were disallowed and the items had to be included in Sellco's ending inventory. The Tax Court (Paccar, 85 TC 754-1985) spells out three factors that apply here.
1. Who determined what items were taken into inventory? Buyco exercised no discretion over what it accepted into inventory. In essence, Sellco was responsible for which items were transferred to Buyco for warehousing Sellco's inventory.
2. Who determined when to scrap existing inventory? There was little or no scrapping. Although not required to do so, Buyco would normally contact its customers prior to any scrapping. Therefore, it was held that the parties had agreed that Buyco would not take any unilateral action regarding scrapping.
3. Who determined when to sell inventory? There were no sales to others. Buyco indicated it would contact Sellco prior to any sales to others. Thus, the right to dispose of the parts rested with Sellco.
There are many ways to legitimately reduce your business tax burden. Send for the Special Report, Your Business America's Best Tax Shelter, ($21) to Blackman Kallick Bartelstein, 300 South Riverside Plaza, Chicago, IL 60606.
Present 10th Annual Safety Award
At the Midyear Production Meeting of the Expanded Shale Clay and Slate Institute in Cohoes, New York, Dr. Masamoto Sasaki accepted the safety plaque for Nihon Mesalite Industry Company, Ltd. of Chiba-Ken, Japan. The plaque, in ESCSI's Tenth Annual Safety Contest, is awarded to the member company having the highest number of man hours worked without a lost-time accident in the past year.