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stated that Mountain State Ford intended to (1) take inventory
"at actual cost regardless of market value", (2) value its parts
inventory on the dollar-value LIFO method, (3) use one pool
(parts pool) for its parts inventory, (4) calculate the price
index for its parts pool pursuant to the link-chain method, and
(5) "determine the cost of * * * [parts] in the closing inventory
in excess of those in the opening inventory" on the basis of
"most recent purchases"; i.e., pursuant to the most recent
purchases method under section 1.472-8(e)(2)(ii)(a), Income Tax
Regs. (most recent purchases method). Mountain State Ford
attached a schedule to the Form 970 which stated in pertinent
part:
Cost System Used for Parts Inventory
The taxpayer [Mountain State Ford] keeps detailed
records of the cost of all parts in inventory. The
total actual cost of all parts inventory will be di-
vided by the number of each type of part on hand at the
end of the year.
In response to a request in the Form 970 to indicate the "Method
used in computing LIFO value of dollar-value pools", Mountain
State Ford attached a schedule which stated in pertinent part:
Link-Chain Method for Parts Inventory
The taxpayer [Mountain State Ford] receives weekly
reports from Ford Motor Company which indicate the
increase in prices for a major portion of the parts
inventory which is supplied to the taxpayer from Ford
Motor Company. The taxpayer compares this list of
prices with the actual cost of the same items in the
parts inventory to develop a current year price index.
* * * The index developed by this large sample is then
applied to the total parts inventory. Once a yearly
index is developed it will be added to prior year
indices to develop a cumulative index.
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