-41-
that satisfy the requirements of section 471, to mean in the case
of inventories for goods in process and for finished goods--
(1) the cost of raw materials and supplies entering
into or consumed in connection with the product,
(2) expenditures for direct labor, and (3) indirect
production costs incident to and necessary for the
production of the particular article * * *
The foregoing definition of the term "cost" does not transform
the latter two items in that definition (viz, in the instant case
labor and overhead) into goods subject to inventory as to which a
taxpayer may elect the LIFO inventory method under section 472.
In other words, just because the costs of the labor and overhead
involved here are two of the three basic elements of cost that
were reflected in Consolidated’s inventories for goods in process
and for finished goods, see sec. 1.471-4(a), Income Tax Regs.,
does not convert labor and overhead into goods themselves as to
which Consolidated could have elected the LIFO inventory method
under section 472.
Nor does the fact that the cost of Consolidated’s new parts,
one of the two raw materials used by Consolidated in its
remanufacturing business, is a third basic element of cost that
also was reflected in Consolidated’s inventories for goods in
process and for finished goods, see id., mean that its labor and
overhead, when combined with its new parts, become goods as to
which Consolidated could have elected the LIFO inventory method
under section 472. As stated above, the goods produced by
Consolidated are remanufactured automobile parts or a type or
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