Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 60-92

1960-1 C.B. 708

IRS Headnote

Samples of spirits taken from containers on the bottling premises of a distilled spirits plant and held in the laboratory on the bottling premises for analysis but not immediately used are considered to be `in process' for the purpose of computing losses upon which claim may be filed pursuant to section 5008(c) of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 60-92

Advice has been requested whether samples of spirits taken from containers and not immediately used but retained on the bottling premises of a distilled spirits plant may be considered as being `in process' for the purpose of computing losses upon which a claim may be filed pursuant to section 5008(c) of the Internal Revenue Code of 1954.

Section 5008(c) of the Code provides in part as follows:

(c) LOSS OF DISTILLED SPIRITS WITHDRAWN FROM BOND FOR RECTIFICATION OR BOTTLING.-

(1) GENERAL.-Whenever any distilled spirits withdrawn from bond on payment or determination of tax for rectification or bottling are lost before the completion of the bottling and casing or other packaging of such spirits for removal from the bottling premises of the distilled spirits plant to which removed from bond, the Secretary or his delegate shall, under such regulations as he may prescribe, abate, remit, or, without interest, credit or refund the tax imposed on such spirits under section 5001(a)(1) to the proprietor of the distilled spirits plant who withdrew the distilled spirits on payment or determination of tax for removal to his bottling premises, if it is established to the satisfaction of the Secretary or his delegate that-

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(B) such loss occurred by reason of, and was incident to, authorized rectifying, packaging, bottling, or casing operations (including losses by leakage or evaporation occurring during removal from bond to the bottling premises and during storage on bottling premises pending rectification or bottling).

Section 201.482 of the Distilled Spirits Plants Regulations provides, in part, that spirits used up in bona fide analysis and testing on bottling premises shall be considered as lost by reason of, and incident to, authorized operations and that such spirits may be included in the quantities for which a claim may be filed pursuant to section 5008(c) of the Code.

In view of the above, samples of spirits taken from containers on the bottling premises of a distilled spirits plant and held in the laboratory on the bottling premises for analysis but not immediately used are considered to be `in process' for purposes of computing losses upon which claim may be filed pursuant to section 5008(c) of the Code. Moreover, no time limit is prescribed within which the samples must be used, and because the size of the samples in relation to the batches should be insignificant, it is unnecessary to make notations concerning their removal on Form 122, Rectifier's Notice of Dumping and Rectification, Spirits, Wines, or Other Liquors, and Return of Gauge, Form 230, Description and Gauge of Spirits or Wines for Bottling without Rectification, Form 237, Report of Rectified Spirits and Wines, or Form 1520, Report of Spirits Gauged.

Furthermore, an inventory of the samples held for analysis and testing on the bottling premises should be made at the end of the claim period and included in the inventory of other spirits in process. Since the sample inventory, however, might normally be expected to have a negligible effect on bottling losses, the use of average proof, average bottle content, and number of bottles should provide an inventory figure sufficiently accurate for the purpose.