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making use of the LCM method of valuation highly impracticable
and imprecise. Furthermore, the taxpayer in Atlantic Coast
Realty failed to show that the inventorying of real estate was an
established and accepted accounting practice. The Board held
that taxpayers are not entitled to use the inventory method to
account for real property.
In W.C. & A.N. Miller Dev. Co. v. Commissioner, supra, the
taxpayer, a real-estate developer, had applied for permission to
change to the last-in-first-out (LIFO) method of valuing its
inventory of houses constructed and held for sale. The taxpayer
admitted that under Atlantic Coast Realty land costs could not be
inventoried but contended that the houses on the land could be
inventoried and that the job-cost method it had previously used
to determine the gain or loss on the sale of each house was a
specific identification inventory method of accounting. The
Commissioner maintained that the job-cost method was merely a
proper capitalization of tax taxpayer’s acquisition, development,
construction, and other costs. We held that the taxpayer had
failed to prove that it had previously used an inventory method
of accounting and that the taxpayer had not shown that the use of
inventories represented the best practice in its industry in
accordance with generally accepted accounting principles. We
further held that a finished house on a lot is not "merchandise"
within the meaning of section 1.471-1, Income Tax Regs., and that
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