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According to petitioner, respondent's interpretation of the term
"cost" in section 472(b)(2) as meaning actual cost is wrong, and
Mountain State Ford's method of using replacement cost qualifies
as any other proper method under section 1.472-8(e)(2)(ii)(d),
Income Tax Regs., which does not require the use of actual cost.
To support his argument that respondent's position about the
meaning of the term "cost" in section 472(b)(2) and the regula-
tion thereunder is wrong, petitioner asserts:
With regard to the "cost" requirement in section
472(b)(2), the petitioner submits that an examination
of the statute and regulations, as well as the histori-
cal development surrounding the LIFO method, makes
clear that the cost requirement in section 472(b)(2) is
simply the expression of the rule that the lower of
cost or market method may not be used in conjunction
with the LIFO method. Accordingly, the respondent is
attempting to extend the cost requirement in section
472(b)(2) far beyond its intended scope.
* * * * * * *
* * * The use of replacement costs * * * under the
dollar-value LIFO method does not in any way represent
a use of lower of cost or market and, accordingly, does
not violate the cost requirement of section 472.
Even assuming arguendo that petitioner were correct in his
contention about the reason why Congress required that goods for
which a taxpayer elected the LIFO method be inventoried at cost,7
that contention does not address the meaning of the term "cost"
7 It is noteworthy that the replacement cost as of the date
of Mountain State Ford's physical inventory, which it used in
determining the LIFO value of its dollar-value parts pool, is
analogous to "market" in inventory tax accounting. See Thor
Power Tool Co. v. Commissioner, 439 U.S. 522, 534 (1979); sec.
1.471-4(a)(1), Income Tax Regs.
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