Paccar, Inc. And Subsidiaries v. Commissioner Internal Revenue Service

Paccar, Inc., appeals from a decision of the United States Tax Court, 85 T.C. 754 (1985), upholding the determination of deficiencies assessed by the Commissioner for the tax years 1975 through 1977. The primary issue is whether Paccar may claim an inventory loss resulting from its transfer of equipment parts to a third party. We affirm.

Paccar, through its various divisions, engages in the manufacture and distribution of trucks, truck parts, mining vehicles, and rail cars. In 1976 and 1977, three divisions of Paccar (Paccar Parts, Dart, and Wagner) entered into written agreements with Sajac Company, Inc., an unrelated corporation, for the disposition of certain inventory of equipment parts. The agreements provided: (1) Sajac would purchase “selective excess, inactive or unusable parts hereinafter referred to as scrap material” at the pre vailing market price for scrap metals; (2) title, ownership and “risk of loss” would pass to Sajac, and the Paccar division would pay the costs of shipping to Sajac’s warehouse; (3) Sajac was “not, in any manner, express or implied, a bailee of the scrap material, nor is Sajac in any way an agent of” the Paccar division; (4) the Pac-car division…