The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1921-12-19
NO DIFFICULTY IN
TAKING INVENTORY
Task of Business Man in Complying
With New Revenue Act Is
Explained.

The following statement is Issued by
collector of Internal revenue, D. T.
Gerow, of the district of Florida:
Merchants manufacturers and bus
mess men generally need experience no
difficulty in taking their inventories
for 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 20s). relating to in
yentories, are identical:
That whenever in the opinion of
the commissioner the use of invento-
ries is necessary in order clearly to de-
termine the income of any taxpayer.
inventories shall be taken by such tax
payers upon such basis as the commits
sioner, with the approval of the secre-
tary, may prescribe as conforming as
nearly as may be to the best acco1nt-
ing practice in the trade or business,
and as most clearly rejecting the
income
Present treasury regulations pro-
vide that inventories must be valued
at either cost or cost or market
whichever is lower Taxpayers were
permitted regardless of their pas
practice, to adopt the cost or marlzet
basis, whichever is lower in taking
their inventories for 1920 Thereafte.
the regulations provide, changes can b.
made only after permission is obtained
from the commissioner of interna
revenue.
"In the case of a merchant cost
means the invoice price less trade O
other discounts, excepting strictly casI
discounts approximating a fair rate o
interest, which may be deducted or no
at the option of the taxpayer provid
ing a consistent course is followed. Tt
the net invoice price should be adde,
the cost of transportation and othe
necessary charges incurred in acquir
ing possession of the goods
In the case of n manufacturer cost
means the cost of raw materials an
supplies, expenditures for labor and in.
direct costs incident to production, in
,luding proportion OF management ez
penses but not including any cost O
selling or securing return on capital
Market means the current bic
price prevailing at the date of the in
'entory for the particular merchandist
The burden of proof as to the correct
ness of the price rests upon the ia
payer in each case. Where no ope
market quotations are available, tn
taxpayer must use such evidence of
fair market price at the dates neares !
the inventory as may be available, sucl
as specific transactions or. comuensa.
ions paid for cancellation of contract
n purchase commitments. Where, b.
ause of abnormal conditions the ia
payer has regularly sold merchants /
~, -
price, the inventory may be valued q
such prices. The correctness Of sue
prices will be determined by referenc |
TO the actual sales of the taxpayer fo |
a reasonable period before and afte
the date of inventory Prices whic
vary materially from the actual price !
so ascertained win not be accepted {
eflecting the market.
"The value Of each item in the i |
entory may be measured by cost
market. whichever is lower. An enti
stock may not be inventoried at cos
md also at market price, and the low
Of the two inventories used. Inve.
cries on whatever basis taken will !
subject to investigation by the conmis
3ioner of internal revenue, and the ia
payer must satisfy the commission
IF the correctness Of the prices adopte
Re must be prepared to show both Ii |
cost and the market r-ice of each & /
.cle included in the inventory.
I'm the conduct of modern busine. |
is of the utmost Importance tn
very business, large or small, wheth /
corporation, partnership or individu.
hall maintain an exact record of Ie
eipts and expenses. No special sy
EN- of accounts is prescribed by III
bureau of internal revenue, but Il |
books should show in detail invent
les, purchases, sales, capltal inves
nents. depreciation, and similar item
n making up income tax returns"