-31-
filed, Consolidated elected under section 472 to apply as of the
close of its taxable year 1982 the IPI computation method in
calculating its dollar-value LIFO pools. Pursuant to that
method, Consolidated elected to use the October Producer Price
Index report as allowed by section 1.472-8(e)(3)(iii)(C), Income
Tax Regs.
Petitioner contends, and respondent does not dispute,
(1) that Consolidated's LIFO method conforms to GAAP and that it
therefore satisfies the requirement of section 471 and the
regulations thereunder that that method conform "as nearly as may
be to the best accounting practice in the trade or business" and
(2) that Consolidated has consistently applied that method. The
dispute between the parties with respect to Consolidated's LIFO
method is whether respondent abused respondent's discretion in
determining that that method does not clearly reflect income
because it contravenes the requirements of section 472 and the
regulations thereunder and that, consequently, Consolidated’s
election to use that method should be terminated.
We shall begin our consideration of the parties’ dispute by
summarizing the history of the inventory method of tax
(...continued)
are grouped into a pool or pools as described in para-
graphs (b) and (c) of this section. The term "base-
year cost" is the aggregate of the cost (determined as
of the beginning of the taxable year for which the LIFO
method is first adopted, i.e., the base date) of all
items in a pool. * * *
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