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T.C. 437 (1959); Advertisers Exch., Inc. v. Commissioner, 25 T.C.
1086, 1092 (1956), affd. 240 F.2d 958 (2d Cir. 1957).
Investments defined its items of inventory for its new car
pool by body size for taxable years 1974 through 1980. Despite
this general body size definition of item, Investments treated
the Escort model line as a separate item for taxable year 1980.
This treatment of the Escort model line was inconsistent with its
method of defining its items of inventory. Subsequently, in
taxable year 1981, Investments began defining its items of
inventory for its new car pool by model line. This definition of
its items of inventory for its new car pool was inconsistent with
its existing method of defining its items of inventory. In its
new truck pool, Investments variously defined its items of
inventory by body type (i.e., all vans as one item), load
carrying ability, body size, and model line. Each change in the
definition of its items of inventory for its new truck pool
represented an inconsistent application of its method of defining
its items of inventory.
Investments’ inconsistent definition of its items of
inventory for both its new car and new truck LIFO pools strikes
at the heart of the requirement that a taxpayer’s inventory
accounting must clearly reflect income. Investments’
inconsistent definition of its items of inventory violates the
clear reflection rules of the Code, sec. 446(b), the regulations,
secs. 1.471-2(b) and 1.472-8(a), Income Tax Regs., and our case
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