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in section 472(b)(2) and the regulation thereunder. Section
472(b)(2) provides:
(b) Method Applicable.--In inventorying goods
specified in the application described in subsection
(a), the taxpayer shall:
* * * * * * *
(2) Inventory them at cost * * *
The regulation under section 472(b)(2), section 1.472-2(b),
Income Tax Regs., provides:
(b) The inventory shall be taken at cost regard-
less of market value.
Both parties rely in part on dictionary definitions of the
word "cost" to support their divergent positions regarding the
meaning of the term "cost" in section 472(b)(2) and the regula-
tion thereunder. According to respondent, the commonly under-
stood and generally accepted meaning of the word "cost", as
reflected in dictionary definitions, is actual cost. According
to petitioner, dictionary definitions of the word "cost" "clearly
encompass replacement cost." We agree with respondent.
Black's Law Dictionary 345 (6th ed. 1990) defines the word
"cost" to mean: "Expense; price. The sum or equivalent ex-
pended, paid or charged for something. See also Actual cost;
Costs; Net cost; Rate." Merriam-Webster's Collegiate Dictionary
262 (10th ed. 1996) defines the word "cost" to include: "The
amount or equivalent paid or charged for something: price."
Webster's Third New International Dictionary 515 (1993 ed.)
defines the word "cost" to include: "the amount or equivalent
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