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swimming pools. We found the physical construction process
utilized by the taxpayer to be as follows:
The layout site was excavated including dynamiting or
other special techniques if necessary. The plumber
installed the filter, pump, motor, and the skimmer.
Steel reinforcing bars were used to form a metal basket
to fit the excavation and form the shape of the pool.
Wiring was then added to the pool site. The necessary
electrical work was done before the concrete was
poured, covering the steel, plumbing and electrical
work. Tile was placed around the pool surface and the
deck around the pool was constructed. Final details of
construction were the cleanup of the pool area, setting
of the turbos, and plastering of the pool. Equipment
needed to service the pool was then delivered to the
pool site and the operation of the pool was explained
to the customer. [Id.; emphasis added.]
We also found: “Although most supplies came from the warehouse,
some materials such as concrete and tile were purchased for
specific contracts and normally delivered directly to the pool
site.” (Id.; emphasis added.)
The question before us was whether the taxpayer could use
the LIFO method for its inventory of partially completed swimming
pools. The taxpayer overcame the argument that the completed
contract method precluded the use of LIFO, as well as the
argument that the swimming pools were not inventory because they
constituted improvements to land. We held that inventories are
necessary in order to reflect taxable income correctly in every
case in which the sale of merchandise is an income-producing
factor, citing Wikstrom & Sons, Inc. v. Commissioner, 20 T.C.
359 (1953), for the proposition that inventories are required
when merchandise is produced in accordance with customer
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