Carmichael v. Commissioner

5 B.T.A. 456, 1926 BTA LEXIS 2858

• Court: United States Board of Tax Appeals
• Decided: January 1, 1926
• Docket: Docket No. 12061.
• Status: Published

Opinion

oriNioK.

Smith :

Section 203 of the Revenue Act of 1921, provides:

That whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income.

The Commissioner has provided that inventories shall be taken on the basis of (a) cost, or (b) cost or market, whichever is lower. Article 1582, Regulations 62. For a number of years prior to 1918 the petitioner had taken -his inventories upon the basis of cost. When there was an advance in the price of tile during the years 1918 and 1919, the petitioner took his inventories upon the basis of market, which was above cost. By doing so he showed a larger net income than he would have shown if the inventories had continued to be taken upon the basis of cost. The inventory at December 31, 1920, included goods which had generally been purchased at the increased prices. Although the petitioner did not attempt to take his inventory at December 31, 1920, strictly upon the basis of cost or market, whichever is lower, the inventory was actually taken upon that basis, since there was no difference between the cost and the market price. At December 31, 1921, the petitioner took his inventory on the basis of cost or market, whichever is lower, and thereby brought himself within the requirements of the regulations that his inventory must be taken upon the basis of either (a) cost, or (b) cost or market, whichever is lower.

Judgment vñll be entered on 15 days’ notice, under Rule 50.