-82-
Consolidated paid for each customer core delivered to it by a
customer (viz, the core credit amount) was shown on each of the
customer core sales invoices under the column headed "Cores--
Price Each".
Petitioner further contends that section 1012 and the
regulations thereunder relating to the cost basis of property
require Consolidated to ascertain the respective fair market
values of the customer cores that it acquired in determining the
cost of those cores for purposes of section 471. According to
petitioner, the core credit amount for each customer core which
Consolidated acquired exceeded its fair market value, and the
aggregate amount of such alleged excesses is deductible under
section 162 as an amount expended to protect and promote
Consolidated's supply of raw materials. We disagree with
petitioner's position that section 1012 and the regulations
thereunder are determinative of the cost of Consolidated's
customer cores for purposes of section 471. Those provisions do
not control the determination of the proper amounts at which
property must be reflected in a taxpayer's inventories for
purposes of section 471. The regulations under section 1013
relating to the basis of property included in inventory make it
clear that the amounts at which property must be reflected in a
taxpayer's inventories are controlled by section 471 and the
regulations thereunder. Section 1.1013-1, Income Tax Regs.,
provides:
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