The taxpayer, which operated licensed grain elevators, would sell grain that was still owned by the producers who had delivered the grain to the elevators ("storage grain") in addition to selling grain that it had purchased from them. For accounting purposes, the taxpayer assumed that sales of grain at individual elevators were stocked first out of the available stocks of purchased grain at the elevator and only thereafter out of storage grain.
In confirming that the taxpayer, in computing the cost amount of its inventory for inventory purposes, was required to subtract its "negative inventory" elevators for sales that exceeded the quantity of purchased grain on hand, from its positive inventories of purchased grain at other elevators, Stone J.A. stated (at p. 6132):
"The appellant could only lawfully sell purchased grain that it owned. It follows therefore that the only grain 'held for sale' by the appellant... was the purchased grain."