McDonald v. Commissioner

¶1*907OPINION.

¶2The taxpayer claims that his inventories in his retail stores were inflated by reason of the fact that they contained a charge from the wholesale stores of 5 per cent of cost representing a charge added to cover the cost of handling shipment, etc., between the wholesale and retail departments. Assuming, as we must, that this charge represented with reasonable accuracy the actual cost of handling the merchandise, it is apparent that the wholesale department included in its sale to the branches merchandise billed at original cost, plus an estimate for cost of handling, and that it deducted in its accounting the actual cost of handling. The merchandise when so billed to the branch stores was therefore billed at cost and not at cost plus a profit, as the taxpayer alleges. Inventories in the retail stores taken on the basis of the billing of merchandise to them were, therefore, correctly taken and the taxpayer is in error in his claim that such inventories were taken at an inflated price. Such being the case, the determination of the Commissioner must be approved.