This section contains the nature of the case and procedural background.

P was in the gas furnace business. In 1946, he sold 665 furnaces each with a guarantee that he would turn the furnace on and off each year for five years. P amply established that such a service would cost $2 per call. P was an accrual basis taxpayer, and he took a charge of $13,300 to cover the cost of this guaranteed service. The furnaces were sold at a price that was $20-25 more than competitors because of this guarantee that competitors did not offer.

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