Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-68

1970-1 C.B. 122

IRS Headnote

Treatment of merchandise shipped C.O.D. that is unclaimed at the end of the taxable year, postage paid by the shipper on such merchandise returned, and loss on merchandise returned in damaged condition; I.T. 1759 superseded.

Full Text

Rev. Rul. 70-68 /1/

The taxpayer, a domestic corporation, is engaged in the retail mail order business. It makes parcel post shipments C.O.D., guarantees arrival of the goods, and advances postage and collection charges, subject to repayment by the buyer. Not all merchandise so shipped is claimed by the purchaser and the taxpayer is required to pay return postage for the unclaimed shipments. Some of the merchandise returned is in a damaged condition.

Held, since title to the C.O.D. goods does not pass until payment is made, a sale has not been made and the taxpayer must include in its closing inventory merchandise that has not been paid for at the close of the taxable year. Held further, the postage paid on those shipments includible in the closing inventory is deductible only in the year in which the postage is paid by the taxpayer.

Held also, loss on account of C.O.D. merchandise (carried in closing inventory) returned to the taxpayer in a damaged condition is to be determined by the actual sale of such merchandise or by inventory valuation in accordance with the provisions of section 1.471-2(c) of the Income Tax Regulations.

I.T. 1759, C.B. II-2, 31 (1923), is hereby superseded, since the position stated therein is set forth under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.