Mountain State Ford Truck Sales, Inc., E.P. O'Meara, Tax Matters Person - Page 35




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          in" a taxpayer's inventory.  However, the actual cost reasonably            
          approximated under the retail method, which is described in                 
          section 1.471-8, Income Tax Regs., satisfies the definition of              
          the term "cost" in section 1.471-3(d), Income Tax Regs.  Conse-             
          quently, the requirement in section 472(b)(2) that goods for                
          which a taxpayer elected the LIFO method be inventoried at                  
          "cost", which we have held has the same meaning accorded the term           
          "cost" in section 1.471-3, Income Tax Regs., is satisfied by a              
          retailer who elects the dollar-value LIFO method, determines a              
          reasonable approximation of actual cost under the retail method,            
          and, inter alia, complies with section 1.472-1(k), Income Tax               
          Regs., and section 1.472-8(e)(1), Income Tax Regs.  We reject               
          petitioner's argument that the use of the retail method in                  
          conjunction with the dollar-value LIFO method means that Mountain           
          State Ford's method of using replacement cost under the dollar-             
          value LIFO method is permitted by section 472 and the regulations           
          thereunder.17                                                               

               17  We also reject petitioner's position that the use of the           
          standard cost method in conjunction with the dollar-value LIFO              
          method supports his position that Mountain State Ford's method of           
          using replacement cost under the dollar-value LIFO method is                
          permitted under sec. 472 and the regulations thereunder.  In this           
          regard, petitioner states:                                                  
               taxpayers have been consistently permitted to use the                  
               standard cost method under both the full absorption                    
               method and the uniform capitalization method, in con-                  
               junction with the dollar-value LIFO method, despite the                
               fact that standard costs are merely a predetermined                    
               estimate of the taxpayer's actual costs.  Treas. Reg.                  
               �� 1.471-11(d)(3); 1.263A-1(f)(3)(ii)(A).                              
                                                             (continued...)           

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