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(2) Inventory them at cost; and
(3) Treat those included in the opening
inventory of the taxable year in which such
method is first used as having been acquired
at the same time and determine their cost by
the average cost method.
Sections 446 and 471 and the regulations thereunder vest the
Commissioner of Internal Revenue (Commissioner) with wide
discretion in determining whether a method of inventory
accounting should be disallowed because it does not clearly
reflect income. Thor Power Tool Co. v. Commissioner, 439 U.S.
522, 532-533 (1979); Hamilton Indus., Inc. v. Commissioner, 97
T.C. 120, 128 (1991). The Commissioner's interpretation of the
clear-reflection standard under sections 446 and 471 may not be
disturbed unless it is clearly unlawful or plainly arbitrary.
Thor Power Tool Co. v. Commissioner, supra; Hamilton Indus., Inc.
v. Commissioner, supra at 129. The Commissioner's discretion
under sections 446 and 471 is not unbridled, however. Thor Power
Tool Co. v. Commissioner, supra at 533; Hamilton Indus., Inc. v.
Commissioner, supra at 128. We must decide whether respondent
abused respondent's discretion in determining (1)(a) that
Consolidated's LIFO method for 1990 and 1991 does not clearly
reflect income because that method pertained only to new parts,
labor, and overhead, and not also to customer cores, and (b) that
therefore Consolidated's election to use that method should be
terminated and (2) that Consolidated's FIFO-LCM method for the
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