-38-
goods (new parts and reconditioning costs) on LIFO, and
a portion of the goods (cores) on FIFO.
A permissible variance to the inclusion of the
total goods in LIFO is provided by Treas. Reg. � 1.472-
1(c) which allows the LIFO election to be restricted to
raw materials. * * *
* * * * * * *
* * * Consolidated has fashioned a method of accounting
that factors out inflationary price increases for part
of a particular good (labor, overhead and a secondary
raw material--new parts) and takes into account
inflation and changes in market value for the remaining
portion of the goods (the principal raw material--the
core). This is inconsistent with the plain language of
� 472 and the purpose of the LIFO method. A taxpayer
must decide in toto for a type or class of goods whe-
ther it will use either the LIFO method to currently
deduct inflationary price increases or the LCM method
to currently deduct decreases in the market value of
production costs. A taxpayer is not permitted to use a
hybrid of these two methods for a single type or class
of goods.
In support of respondent’s position, respondent points,
inter alia, to section 472(a) and section 1.472-1(a), Income Tax
Regs. Section 472(a) provides in pertinent part: "A taxpayer may
use the [LIFO inventory] method * * * in inventorying goods
specified in an application to use such method". Section 1.472-
1(a), Income Tax Regs., elaborates on section 472(a), in
pertinent part, as follows:
Any taxpayer permitted or required to take inventories
pursuant to the provisions of section 471, and pursuant
to the provisions of �� 1.471-1 to 1.471-9, inclusive,
may elect with respect to those goods specified in his
application and properly subject to inventory to
compute his opening and closing inventories in
accordance with the method provided by section 472,
this section, and � 1.472-2. * * *
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