The New York herald., 1920-12-31
MILLIONS CUT OFF
BY us. TAX RULING
Business Men May Return In
ventories at Either Value
or Cost Prices.
LOSS CLAIMS ALLOWED
Figures Produced for 1918 and
1919 Will Be Accepted for
Readjustments.
LOSS CLAIMS ALLOWED

Special Despatch to THE NEW YoRK HRnAr.o.
New York Herald Bureau.
Washingtou, ID. c., Dec. 20.
Millions of dollars in taxes will be
saved to the business and manufactur-
ing interests of the country by a
Treasury regulation issued to-day per-
mitting all concerns to exercise prefer
ence in returning inventories for tax
purposes at either value or cost price.
Treasury Department action was
prompted by the general situation fol-
lowing a period Of price reduction. It
meets the insistent demand by busi-
ness men and commercial organiza-
tions for relief under the inventory
provisions of the tax law These de-
mands were carried to the Treasury
and to Congress and a campaign was
made to have Congress reinstate the
| inventory loss provisions of the tax
act, which expired last December 81.
Urder previous regulations all con-
Germs were permitted to use their option
| in 1918 and 1919 In either returning In
ventories at cost or market value, but
with the strict provision that the method
selected would have to be followed In
succeeding years. On the rising mar
ket of the two years in question most
firms elected the cost price as the lower.
Now cost prices are In most lines higher
than market value on inventory. and
taxpayers were faced with losses that
they could not stand
In addition to giving relief on 1920
taxes the decision authorizes the filing
of claims for losses In the two previous
years. It Is in part as follows:
Article 1874. Inventories at mar
ket. Under ordinary circumstances
market means the current bid price
prevailing at the date of the inventory
on particular merchandise on the volume
ordinarily purchased by the taxpayer.
This method OF valuation is applicable In
the cases (a) of goods purchased and
on hand (b) OF basic elements OF cost
materials, labor and burden) In goods
in process of manufacture and (c) OF
finished goods on hand, exclusive. how
ever. of goods on hand or In process OF
manufacture for delivery upon firm sales
contracts at fixed prices entered into be-
fore the date of the inventory, which
where. owing to abnormal condi-
tions. the taxpayer has regularly sold
such merchandise at prices lower than
| the current bid price as above deffned
the inventory may be valued at such
prices and the correctness OF such prices
will be determined by reference to the
actual sales Of the taxpayer for rea-
sonable period before and after the date
of the inventory.
prices which differ materially from
the actual prices ascertained will not be
accepted as reflecting the market and
the penalties prescribed for filing false
and fraudulent returns may be en-
| forced.
Goods in process OF manufacture may
be valued for purposes OF inventory on
the lowest Of two different bases.
"The inventories or taxpayers on what
| ever basis taken will be subjected 10 In
vestigation by the Commissioners and the
| taxpayer must satisfy the Commissioner
Of the correctness OF the prices adopted.
He must be prepared to show both the
cost and the market price OF each
article included In the inventory.
TT Is recognized that In the latter
part of 1918, by reason among other
| things of Governmental control not hav-
ing been relinquished, conditions were
abnormal and In many commodities
there was no such scale OF trading as to
establish n free market. In such case,
when a market was established during
the succeeding year. n claim may be
filed for any loss sustained In accord
ance with the provisions OF Section 214
| (a) 12, or Section 234 (e ~ OF the
| statrtp See Articles 26f f-26S)." :"