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Petitioner asserts that respondent has no authority to
require it to use inventory accounting when there is nothing on
hand at the end of the day to count. Petitioner acquired asphalt
directly from the supplier, drove to the job site, and poured it
within a few hours. Any asphalt not laid within 2 to 5 hours of
acquisition hardened and had to be discarded. Thus, hardened-
but-unlaid asphalt was worthless for the job for which it was
ordered and for any other job.
Petitioner’s position has commonsense appeal and some
support in law and in industry practice. See Ansley-Sheppard-
Burgess Co. v. Commissioner, supra (Commissioner agreed that
taxpayer/contractor did not have inventory). Furthermore, until
the early 1990's, the Commissioner generally permitted
construction contractors to account for construction materials
and supplies as supplies, rather than as inventory. See, e.g.,
id. at 375 ("The cash method of accounting has been widely used
throughout the contracting industry and accepted by respondent
since time immemorial."); Hunt Engg. Co. v. Commissioner, T.C.
Memo. 1956-248 (construction contractor purchasing materials for
various jobs as they were needed maintained no inventories; cash
method clearly reflected income).
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