Milford chronicle., 1921-12-23
BUSINESS MUST
TAKE INVENTORIES
1t Is Important That Records
Shall Be Made and Kept Each
January 1st.

The following statement is issued
by Collector of Internal Revenue, H.
T. Graham of the district of Della
ware:
Merchants, manufacturers and Dus-
mess men generally need experience
no difficulty in taking their inventories
Tor the year 1921 to conform with the
new revenue act. The language OF the
Revenue Act of 1918 and the Revenue
Act of 1921, (Sec. 203), relating to in
ventories are identical:
That whenever in the opinion OF
the Commissioner the use of lnVen-
tories is necessary in order clearly 10
determine the income of any taxpayer
Inventories shall be taken by such
taxpayer upon such basis as the Com
missioner, with the approval OF the
Secretary, may prescribe as conform
ing as nearly as may be to the pest
accounting practice in the trade OF
business and as most clearly rehect-
ing the income"
present Treasury regulations prO-
vide that inventories must be valued
at either cost of, cost or Market
whichever is low Taxpayers were
permitted, regardless of their past
nractice. to adopt the cost or market
basis whichever is lower in taking
their inventories for 1920. IhereaIIeI'
the regulations provide, changes can
be made only after permission is oD-
tanned from the Commissioner OF IN
ternal Revenue. .-.,
"Tn the case of a merchant cost
means the invoice price less trade OF
other discounts, excepting strictly
cash discounts approximating falr
rate of interest, which may be deduct
cd or not at the opinion of the TAX
paver. providing a consistent course
is followed. To the net invoice price
should be added the cost Of transpor-
tation and other necessary charges
incurred in acquiring possession Oh
the goods. .. .oo.+,
In the cast of a manufacturer Cost
means the cost of rev materlalS anu
supplies, expenditures for labor anu
indirect costs incident to production,
including a reasonable proportion Oh
management expenses, but not in
cluding any cost of selling or secur-
! ing return on capital -
:" Market means the current nld
price prevailing at the date Oh the IN
ventorv for the particular merchan-
disc. The burden of proof as TO the
correctness of the price rests upon
the taxpayer in each case. Where nO
omen market quotations are avallaDle
the taxpayer must use such evidence
of a fair market price at the dates
nearest the inventory as may De aVall-
able, such a specific TRANSACTIONS ol
conpensation paid for cancellation o.
contracts or purchase commitments
Where. because of abnormal condl-
tions the taxpayer has regularly sole
merchandise at prices lower than The
market bid price, the inventory may
he valued at such prices. The COT
rectness of such prices will be deter
mined by reference to the actua
sales of the taxpayer for reasonable
neriod before and after the date OF IN
ventory. Prices which vary materlall!
from the actual prices so ascertalne'
will not be accepted as rejecting th'
market.
"The value of each item in the IN
VentOry may De measured Wy HOS' y
market, whichever. is lower. An en-
tire stock may not be inventorled a
cost and also at market price, and thu
lower of the two inventories used. In
ventories on whatever basis taken VII
be subject to investigation by the Com
missioner of Internal Revenue, ant
the taxpayer must satisfy the Com
missioner of the correctness OF TN
prices adopted. He must be prepared
to show both the cost and the marke
price of each article included in tn
inventory.
"In the conduct of modern business
it is of the utmost Importance tina
every business, large or small, VINE
Their corporation, partnership or indl
vidual, shall maintain an exact rec
ord of receipts and expenses. No spec
ial system of accounts is prescribed
bv the Bureau of Internal Revenue
but the books should show in detail
inventories, purchases, sales, capita
investments, depreciation, and simllal
items required in making up income
tax returns"