Consolidated Manufacturing, Inc., M. P. Long Living Trust, Merl Philip Long, Trustee, Tax Matters Person - Page 44

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               Petitioner also relies on section 1.472-1(c), Income Tax               
          Regs., to support the validity of Consolidated’s LIFO method.               
          Petitioner asserts:                                                         
                    Respondent apparently believes that Treasury                      
               Regulation 1.472-1(c) supports her position in this                    
               matter.  To the contrary.  Treasury Regulation Section                 
               1.472-1(c) contradicts her argument that the LIFO                      
               inventory method may only be elected with respect to                   
               goods.  Under the raw material content method, a                       
               taxpayer's LIFO election is limited to the cost of raw                 
               materials, including the cost of the raw material                      
               content of work-in-progress and finished goods.  Treas.                
               Reg. � 1.472-1(c).  The Regulation describes the manner                
               in which a taxpayer may segregate the cost of one or                   
               more raw materials from work-in-progress and finished                  
               goods and value those costs using LIFO, while all other                
               costs associated with work-in-progress and the finished                
               good are valued under the FIFO convention.  Thus, a                    
               taxpayer using the raw material content method elects                  
               to value the cost of raw materials (including the cost                 
               of raw materials incorporated into work-in-progress and                
               finished goods) using the LIFO convention, not the raw                 
               material themselves.  Rather than support her position                 
               in this matter, Treasury Regulation Section 1.472-1(c)                 
               provides further evidence of the validity of                           
               Petitioner's [sic] LIFO election.  In addition,                        
               Respondent's attempt to characterize the raw material                  
               content method as the single "permissive variance to                   
               the inclusion of the total goods in LIFO" is not an                    
               accurate statement of the law.  * * *                                  
               We disagree with the foregoing contentions of petitioner as            
          to what section 1.472-1(c), Income Tax Regs., which permits a               
          taxpayer to elect what we shall refer to as the raw material                
          content LIFO inventory method, provides and allows.  We reject              
          petitioner’s position that that regulation "contradicts * * *               
          [respondent’s] argument that the LIFO inventory method may only             
          be elected with respect to goods."  Section 1.472-1(c), Income              
          Tax Regs., which is virtually identical to the 1944 amendment to            




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