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Section 471(a) provides:
(a) General Rule.--Whenever in the opinion of the
Secretary the use of inventories is necessary in order
clearly to determine the income of any taxpayer,
inventories shall be taken by such taxpayer on such
basis as the Secretary may prescribe as conforming as
nearly as may be to the best accounting practice in the
trade or business and as most clearly reflecting the
income.
Section 1.471-2(c) and (d), Income Tax Regs., provides in
pertinent part:
(c) The bases of valuation most commonly used by
business concerns and which meet the requirements of
section 471 are (1) cost and (2) cost or market,
whichever is lower. * * *
(d) * * * Goods taken in the inventory which have
been so intermingled that they cannot be identified
with specific invoices will be deemed to be the goods
most recently purchased or produced * * *. But see
section 472 as to last-in, first-out inventories. * * *
Section 472(a) and (b) provides:
(a) Authorization.--A taxpayer may use the method
provided in subsection (b) (whether or not such method
has been prescribed under section 471) in inventorying
goods specified in an application to use such method
filed at such time and in such manner as the Secretary
may prescribe. The change to, and the use of, such
method shall be in accordance with such regulations as
the Secretary may prescribe as necessary in order that
the use of such method may clearly reflect income.
(b) Method Applicable.--In inventorying goods
specified in the application described in subsection
(a), the taxpayer shall:
(1) Treat those remaining on hand at the
close of the taxable year as being: First,
those included in the opening inventory of
the taxable year (in the order of
acquisition) to the extent thereof; and
second, those acquired in the taxable year;
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