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In its recomputations for the taxable years 1974 through
1980, Investments defined the units used to compute beginning of
the year value of ending inventory for its new car pool by
vehicle body size (body size).4 For example, in 1980,
Investments separated its new cars into six categories: Full
size, luxury, midsize, compact, subcompact, and Escort. The full-
size category included eight model codes of full-size LTD
automobiles. The luxury category included one model code of
Thunderbird automobiles. The midsize category included four
model codes of midsize LTD automobiles and two model codes of
Granada automobiles. The compact category included four model
codes of Fairmont automobiles. The subcompact category included
four model codes of Mustang automobiles and three model codes of
Pinto automobiles. The Escort model line was introduced for the
first time in 1980.
Starting in 1981, Investments defined its new car pool
inventory units by model line. Thus, each model line was a
different category, e.g., Mustang model line, Escort model line,
Tempo model line, etc. After it began defining its new car pool
inventory units by model line, in place of body size, Investments
did not restate its LIFO indexes for 1974 through 1980 based on
the model line classification. Furthermore, Investments did not
file Form 3115, Application for Change in Accounting Method, or
4 All references to "inventory units" are to the definition of
the units used to compute beginning of the year value of ending
inventory. See discussion in sec. B.2., infra pp. 21-22.
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Last modified: May 25, 2011