- 31 -
the average acquisitions cost method or the so-called
"other" method that * * * [Mountain State Ford] is
using. Accordingly, the respondent's interpretation of
the regulations imports into Treas. Reg. � 1.472-
8(e)(2)(ii)(d) a requirement that does not exist in the
regulations. For example, under the average acquisi-
tions cost method described in Treas. Reg. � 1.472-
8(e)(2)(ii)(c), the unit cost assigned would often not
be the actual cost of any units; for example, where
half the units acquired during the year were acquired
at a cost of $10 and half were acquired at a cost of
$11, the unit cost determined under the average cost
method, $10.50, is not the actual cost of any units.
As petitioner acknowledges, the determination of the
current-year cost of items making up a pool must be made
(1) under the most recent purchases method under section 1.472-
8(e)(2)(ii)(a), Income Tax Regs., by "reference to the actual
cost of the goods most recently purchased or produced", and
(2) under the earliest acquisition method under section 1.472-
8(e)(2)(ii)(b), Income Tax Regs., by "reference to the actual
cost of the goods purchased or produced during the taxable year
in the order of acquisition". We believe that those respective
regulations mandate that actual cost be used because of the
requirement in section 472(b)(2) that goods with respect to which
a taxpayer elected the LIFO method be inventoried at cost; i.e.,
actual cost. Section 1.472-8(e)(2)(ii)(c), Income Tax Regs.,
requires a taxpayer electing the average unit cost method de-
scribed therein to divide the aggregate cost of all the goods
purchased or produced throughout the taxable year, which peti-
tioner does not dispute, and we conclude, means the aggregate
actual cost of such goods, by the total number of units so
purchased or produced in order to arrive at an average unit cost.
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011