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defined in the Code or regulations. Attempting to discern the
meaning of the term, the Court of Appeals for the First Circuit
applied the rule that “`[t]he natural and ordinary meaning of the
words used will be applied [in construing tax statutes] unless
the Congress has definitely indicated an intention that they
should be otherwise construed’”. Wilkinson-Beane, Inc. v.
Commissioner, 420 F.2d 352, 354 (1st Cir. 1970) (quoting
Huntington Sec. Corp. v. Busey, 112 F.2d 368, 370 (6th Cir.
1940)), affg. T.C. Memo. 1969-79. We have long held that the
natural and ordinary meaning of “merchandise” does not include
real property. See W.C. & A.N. Miller Dev. Co. v. Commissioner,
81 T.C. 619, 630 (1983); Atlantic Coast Realty Co. v.
Commissioner, 11 B.T.A. 416, 419 (1928); Homes by Ayres v.
Commissioner, T.C. Memo. 1984-475, affd. 795 F.2d 832 (9th Cir.
1986).
In Atlantic Coast Realty Co. v. Commissioner, supra, the
taxpayer owned various parcels of raw land held for sale to
customers. The taxpayer contended that it should be allowed to
inventory its land and that it should be allowed to use the LCM
method to value its closing inventory. The Board noted that
Congress did not intend, by the predecessor of section 471
(section 203 of the Revenue Act of 1918, ch. 18, 40 Stat. 1060),
to confer the right to use inventories on all businesses. The
Board observed that a parcel of real estate is a unique item,
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