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the LIFO method does not clearly reflect income because
it is contrary to the requirements of sec. 472, I.R.C.,
and the regulations thereunder and that M's ordinary
income for the year at issue should be adjusted to
include the amount of the so-called LIFO reserve that M
had computed during the period 1980 through the year at
issue.
Held: Respondent did not abuse respondent's
discretion in determining that M's method of using
replacement cost in valuing its parts inventory under
the LIFO method does not clearly reflect income.
Held, further: Respondent did not place M on an
impermissible method of inventory accounting when
respondent adjusted M's ordinary income for the year at
issue to include the amount of the so-called LIFO
reserve that M had computed during the period 1980
through the year at issue, and consequently respondent
did not abuse respondent's discretion in making that
adjustment.
Leslie J. Schneider, Patrick J. Smith, and William F.
Garrow, for petitioner.
Michael J. Cooper, for respondent.
CHIECHI, Judge: Respondent determined S corporation adjust-
ments for 1991 to the ordinary income of Mountain State Ford
Truck Sales, Inc. (Mountain State Ford), in the amount of
$504,013.
The issues remaining for decision are:
(1) Did respondent abuse respondent's discretion in deter-
mining that Mountain State Ford's method of using replacement
cost in valuing its parts inventory under the LIFO method does
not clearly reflect income? We hold that respondent did not.
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