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[Wendle Ford Sales, Inc. v. Commissioner, 72 T.C. 447, 452
(1979); citations omitted.]
Investments used the dollar-value LIFO method to calculate
its ending inventory. Under the dollar-value method, inventory
is grouped into “pools”5 composed of “items”. Hamilton Indus.,
Inc. & Sub. v. Commissioner, supra at 131; sec. 1.472-8(a),
Income Tax Regs. To determine whether there has been a change in
inventory value from the prior year, the current year aggregate
cost of the items in ending inventory for each pool is valued at
“base-year cost”; base-year cost is the aggregate cost of all
items in the pool at what they cost (or would have cost) as of
the beginning of the taxable year for which the LIFO method was
first adopted. Sec. 1.472-8(a), Income Tax Regs. After
converting the current year ending inventory from current-year
cost to base-year cost, the value of the beginning and ending
inventory in terms of base-year cost is compared to determine
whether an increase or decrease in inventory value has occurred.
Id. Thus, to ascertain whether a taxpayer’s ending inventory has
increased or decreased in real quantity terms, it is necessary to
compare the value of the beginning and ending inventories of a
particular taxable year expressed in terms of the same dollar
5 In the case of a retailer, such as Investments, the
regulations provide that the inventory shall be grouped by “major
lines, types, or classes of goods.” Sec. 1.472-8(c), Income Tax
Regs. Investments, pursuant to Richardson Invs., Inc. v.
Commissioner, 76 T.C. 736 (1981), used two pools, one for new
cars and one for new trucks.
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