- 26 -
The definition of the term "cost" in section 1.471-3, Income
Tax Regs., is virtually the same as the definition of the term
"cost" as it appeared in the regulations promulgated under
section 203 of the Revenue Act of 1918 (1918 Act), ch. 18, 40
Stat. 1060, the original predecessor of section 471, which first
required certain taxpayers to use the inventory accounting
method. See Regs. 45, art. 1583 (1918). The definition of the
term "cost" as it appeared in the regulations under the 1918 Act
was repromulgated in virtually the same language in the regula-
tions issued under all subsequent Federal tax provisions that
continued to require certain taxpayers to use the inventory
accounting method. The term "cost" in inventory tax accounting
had a settled meaning when Congress first permitted certain
taxpayers to elect the LIFO method, Revenue Act of 1938, ch. 289,
sec. 22(d), 52 Stat. 459,11 and shortly thereafter when Congress
11 The regulations in effect when Congress first allowed
certain taxpayers to elect the LIFO method and required that the
goods with respect to which that method was elected be invento-
ried at cost, Regs. 94, art. 22(c)-3 (1936), defined the term
"cost" for inventory accounting purposes as follows:
Art. 22(c)-3. Inventories at cost.--Cost means:
(1) In the case of merchandise on hand at the
beginning of the taxable year, the inventory price of
such goods.
(2) In the case of merchandise purchased since the
beginning of the taxable year, the invoice price less
trade or other discounts, except strictly cash dis-
counts approximating a fair interest rate, which may be
deducted or not at the option of the taxpayer, provided
a consistent course is followed. To this net invoice
price should be added transportation or other necessary
(continued...)
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011