Case: Appeal of FRANK McDONALD
Abbreviation: Appeal of McDonald
Decision Date: 1925-10-19
Docket Number: Docket No. 3194
Citation: 2 B.T.A. 906
Volume: 2
Reporter: Reports of the United States Board of Tax Appeals
Court: United States Board of Tax Appeals
Jurisdiction: United States
Parties: Appeal of FRANK McDONALD.
Judges: Before James, Littleton, Smith, and Teussell.
Pages: 906–907

Head Matter:
Appeal of FRANK McDONALD.
Docket No. 3194.
Submitted June 16, 1925.
Decided October 19, 1925.
F. 0. Graves, Esq., for the Commissioner.
Before James, Littleton, Smith, and Teussell.

Opinion:
OPINION.
James:
The 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.