- 24 -
specifically, we have found that, if goods or products have
substantially dissimilar characteristics, whether in terms of
their physical nature, Wendle Ford Sales, Inc. v. Commissioner,
supra at 459, or whether in terms of cost, Amity Leather Prods.
Co. v. Commissioner, supra at 739-740, these goods or products
are properly treated as new or separate items. Hamilton Indus.,
Inc. & Sub. v. Commissioner, supra at 136-137.15 Furthermore, a
reconstruction of base-year cost for a new or separate item will
not be treated as a change in method of accounting under section
446(e). See Amity Leather Prods. Co. v. Commissioner, supra at
739-740; see also sec. 1.446-1(e)(2)(ii)(b), Income Tax Regs.
In analyzing whether a new or separate item was created or
arose in taxable year 1981, we note that petitioner does not
allege that the physical character or cost of Investments’ new
car inventory substantially changed between taxable years 1980
and 1981. Furthermore, the record does not indicate that such a
change occurred. Rather, it appears that Investments changed its
definition of its items of inventory without the predicate change
in facts required by the previously noted exception for the
creation of a new or separate item. Accordingly, we hold that
Investments' change in definition of its items of inventory was
not due to the creation of a new or separate item. Amity Leather
15 To determine whether a new or separate item exists, we
examine the facts and circumstances of the case. Wendle Ford
Sales, Inc. v. Commissioner, 72 T.C. 447, 459 (1979).
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