Mountain State Ford Truck Sales, Inc., E.P. O'Meara, Tax Matters Person - Page 1

                                   112 T.C. No. 7                                     

                               UNITED STATES TAX COURT                                

                               PERSON, Petitioner v.                                  
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 16350-95.                    Filed March 2, 1999.           

                    Company M (M), a heavy truck dealer, purchased                    
               heavy truck parts and accessories (parts) from the                     
               manufacturers of those parts and sold them to its                      
               customers.  M, which is required to use inventories                    
               pursuant to sec. 471, I.R.C., made elections under sec.                
               472, I.R.C., effective as of the close of its taxable                  
               year 1980, to apply the last-in, first-out (LIFO)                      
               method of inventory accounting (LIFO method) with                      
               respect to its parts inventory, to use the dollar-value                
               LIFO method, to calculate the price index for its parts                
               pool pursuant to the link-chain method, and to use the                 
               "most recent purchases method" in computing the "total                 
               current-year cost of items making up" its parts pool.                  
               In determining that current-year cost as a first step                  
               in valuing its parts inventory under the dollar-value                  
               LIFO method, M used the respective manufacturers'                      
               prices that were in effect as of the date of its physi-                
               cal inventory (replacement cost) for the inventoried                   
               parts that it had purchased.                                           
                    Respondent determined that M's method of using                    
               replacement cost in valuing its parts inventory under                  

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