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Respondent counters that respondent has not terminated
Mountain State Ford's elections to value its parts inventory
under the dollar-value, link-chain LIFO method and to use the
most recent purchases method in determining the current-year cost
of its parts pool. According to respondent, respondent has
merely required Mountain State Ford to conform to the elections
that it made in the Form 970 which it filed with its 1980 tax
return. Respondent states on brief:
All respondent has done in this case is to determine
that * * * [Mountain State Ford's] LIFO reserve was
incorrectly calculated because * * * [Mountain State
Ford] used replacement cost. * * * [Mountain State
Ford] did not attempt to reconstruct or recalculate the
corrected reserve amount or provide evidence from which
an estimate could be made. Because of this, respondent
was unable to determine the amount of the corrected
reserve and had to restore the reserve to income.
We agree with respondent. In contradistinction to the cases
on which petitioner relies, in the instant case Mountain State
Ford did not comply with the requirement of section 1.472-2(h),
Income Tax Regs., that it maintain detailed inventory records "as
will enable the district director readily to verify * * * [Moun-
tain State Ford's] inventory computations as well as * * * [its]
compliance with the requirements of section 472" and the regula-
tions thereunder. Consequently, Mountain State Ford did not
have, and did not provide to respondent, the records that were
necessary in order to calculate for the period 1980 through 1991
(1) the LIFO and non-LIFO value of its parts inventory and
(2) its LIFO reserve on the basis of invoice prices or a cost
other than replacement cost.
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