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Respondent's Determinations
Respondent mailed notices of final S corporation
administrative adjustment (notices) for 1990 and 1991,
respectively, to Merl Philip Long, grantor and trustee of the
M.P. Long Living Trust, the tax matters person. Respondent
determined in the notices that Consolidated improperly excluded
customer cores from the calculation of its inventories under
Consolidated's LIFO method for each of those years and that,
consequently, Consolidated's LIFO election should be terminated.
Respondent also determined in the notices that Consolidated did
not reflect the proper amounts for customer cores in its
inventories under Consolidated's FIFO-LCM method for each of
those years.4
OPINION
This case presents several inventory accounting issues that
implicate sections 446, 471, and 472. Section 446 provides in
pertinent part:
(a) General Rule.--Taxable income shall be
computed under the method of accounting on the basis of
which the taxpayer regularly computes his income in
keeping his books.
(b) Exceptions.--If no method of accounting has
been regularly used by the taxpayer, or if the method
used does not clearly reflect income, the computation
of taxable income shall be made under such method as,
in the opinion of the Secretary, does clearly reflect
income.
4 Petitioner conceded the remaining determination in the
notice for 1990.
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