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first enacted the LIFO provisions or at any other time thereaf-
ter. We hold that the definition of the term "cost" in section
1.471-3, Income Tax Regs., which is intended to arrive at actual
cost, applies to the term "cost" in section 472(b)(2) and the
regulation thereunder.12 See Commissioner v. Keystone Consol.
Indus., Inc., 508 U.S. 152, 158-159 (1993).
12 Our holding as to the meaning of the term "cost" in sec.
472(b)(2) and the regulation thereunder disposes of petitioner's
contention that "respondent may not interpret the rules and
regulations in a way that will impose unreasonable administrative
burdens on taxpayers attempting to use the LIFO method or in a
way that will diminish or eliminate the availability of the LIFO
method to a significant group of taxpayers". Respondent has no
discretion to deviate from the requirements of the Code and the
regulations even if such requirements were to impose administra-
tive burdens on Mountain State Ford. On the record before us,
however, we find that petitioner has not established that respon-
dent's position in the present case that the term "cost" in sec.
472(b)(2) means actual cost would result in the imposition of
unreasonable administrative burdens on Mountain State Ford.
Petitioner acknowledges that it is not impossible for Mountain
State Ford to use actual cost, and not replacement cost, in
valuing its parts inventory. In fact, Mr. Hommer, petitioner's
expert on computerized inventory-tracking systems, admitted that
the reason why there is no inventory recordkeeping system cur-
rently available in the automobile and truck dealer industry that
uses actual cost in that valuation process is because there has
been no demand for such a system in that industry. Moreover,
when Mountain State Ford adopted the LIFO method, Mountain State
Ford made no attempt to determine whether it could have modified
its perpetual inventory recordkeeping system so that it could
have used invoice prices, i.e., actual cost, in valuing its parts
inventory. Nor did it determine whether it could have created a
new inventory recordkeeping system that could have used invoice
prices or actual cost in that valuation process. In fact, when
questioned by this Court as to why Mountain State Ford continued
to use replacement cost, and did not use invoice prices or actual
cost after it elected the LIFO method as of 1980, Eugene Peter
O'Meara, Jr., testified that replacement cost had been utilized
by Mountain State Ford previously and that Mountain State Ford
did not consider using other than replacement cost when it
elected the LIFO method.
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