- 18 -
using the invoice prices of parts inventoried or a cost other
than replacement cost. That was because Mountain State Ford did
not have, and did not provide to respondent, the records that
were necessary in order to calculate for the period 1980 through
1991 (1) the LIFO value and the non-LIFO value of its parts
inventory and (2) its LIFO reserve on the basis of invoice prices
or a cost other than replacement cost. Thus, the non-LIFO value
that was used to compute the amount of the adjustment at issue in
the notice (i.e., the amount of the LIFO reserve that Mountain
State Ford had calculated for the period 1980 through 1991) was
based on replacement cost.
OPINION
The issues presented implicate not only section 472, enti-
tled "Last-In, First-Out Inventories", but also section 446,
entitled "General Rule for Methods of Accounting", and section
471, entitled "General Rule for Inventories". Sections 446 and
471 and the regulations thereunder are the provisions that vest
the Commissioner of Internal Revenue (Commissioner) with wide
discretion in determining whether a method of inventory account-
ing should be disallowed because it does not clearly reflect
income. Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 532-
533 (1979); Consolidated Manufacturing, Inc. v. Commissioner, 111
T.C. 1, 19 (1998). The Commissioner's interpretation of the
clear-reflection standard under sections 446 and 471 may not be
disturbed unless it is clearly unlawful or plainly arbitrary.
Thor Power Tool Co. v. Commissioner, supra; Consolidated Manufac-
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