- 27 -
permitted all taxpayers to elect that method, Revenue Act of
1939, ch. 247, sec. 219, 53 Stat. 877. In requiring that goods
for which a taxpayer adopted the LIFO method be inventoried at
cost, Congress presumptively was aware of the established regula-
tory definition of the term "cost" in inventory tax accounting.
If Congress had intended for the term "cost" in LIFO inventory
tax accounting to have a meaning different from that regulatory
definition, it would have so stated. It did not do so when it
11(...continued)
charges incurred in acquiring possession of the goods.
(3) In the case of merchandise produced by the
taxpayer since the beginning of the taxable year,
(a) the cost of raw materials and supplies entering
into or consumed in connection with the product,
(b) expenditures for direct labor, (c) indirect ex-
penses incident to and necessary for the production of
the particular article, including in such indirect
expenses a reasonable proportion of management ex-
penses, but not including any cost of selling or return
on capital, whether by way of interest or profit.
(4) In any industry in which the usual rules for
computation of cost of production are inapplicable,
costs may be approximated upon such basis as may be
reasonable and in conformity with established trade
practice in the particular industry. Among such cases
are (a) farmers and raisers of live stock (see article
22(c)-6), (b) miners and manufacturers who by a single
process or uniform series of processes derive a product
of two or more kinds, sizes, or grades, the unit cost
of which is substantially alike (see article 22(c)-7),
and (c) retail merchants who use what is known as the
"retail method" in ascertaining approximate cost (see
article 22(c)-8).
The definition of the term "cost" in Regs. 94, art. 22(c)-3
(1936), is virtually identical to the definition of that term in
sec. 1.471-3, Income Tax Regs.
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