- 17 - method because it had used that method prior to adopting the LIFO method and because that was the method used by the heavy truck dealer industry. In using replacement cost in valuing its parts inventory under the LIFO method, Mountain State Ford was not attempting to, and did not, determine or approximate the invoice prices of the parts that it purchased. On May 22, 1995, respondent issued a notice of final S corporation administrative adjustment (notice or FSAA) for 1991 to Mr. O'Meara, the tax matters person. In the notice, respon- dent did not terminate the elections that Mountain State Ford made in the Form 970 to value its parts inventory under the dollar-value, link-chain LIFO method and to use the most recent purchases method in determining the current-year cost of its parts pool. However, respondent determined in the notice that the cost of goods sold reported in Mountain State Ford's 1991 return should be reduced, and the ordinary income reported in that return should be increased, by $463,515.3 The amount of that reduction and that increase was equal to the amount of the LIFO reserve that Mountain State Ford had calculated over the period 1980 through 1991 (LIFO reserve). The adjustment at issue in the notice thus was based on restoring to Mountain State Ford's income the amount of that LIFO reserve. In making that adjustment, respondent was unable to, and did not, recompute Mountain State Ford's non-LIFO inventory value under a method 3 The parties settled the remaining adjustments in the notice.Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
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