The Fallon standard. (Fallon, Nev.) 1920-1958, 1921-12-21
Says Inventory
Law Not Changed
Collector of Internal Revenue Ayers
Act Same as Statute of 1918
Regarding Inventories
BUSINESS MEN SHOULD HAVE
NO TROUBLE WITH RETURNS
All Receipts and Expenses; No
Method Is Prescribed


Nevada:
Merchants, manufacturers and
business men generally need expert
enee no difficulty in taking their in
yentories for the year 1921 to con-
form with the new revenue act. The
language of the Revenue Act of
1918 and the Revenue Act of 1921,
tSec. 203), relating to inventories
are identical:
THAT whenever in the opinion of
the Commissioner the use of inven-
tories is necessary In order clearly
to determine the income of any tax
payer, inventories shall be taken by
such taxpayer upon such basis as the
Commissioner, with the approval of
the Secretary, may prescribe as con-
forming as nearly as may be to the
best accounting practice in the
ly rejecting the income
Present Treasury regulations
provide that inventories must be
valued at either cost or cost or
market, whichever is lower Tax
payers were permitted, regardless
Of their past practice, to adopt the
cost or market basis, whichever is
lower in taking their inventories
for 1920. Thereafter, the reguia-
tions provide, changes can be made
only after permission is obtained
from the Commissioner of Internal
Revenue.
In the case of merchant cost
means the invoice price less trade or
other discounts, excepting strictly
cash discounts approximating a fair
rate Of interest, which may be de-
Quoted or at the option of the tax
payer, providing a consistent course
is followed. To the net ? invoice
price should be added the cost of
transportation and other necessary
charges incurred in acquiring pos
session OF the goods.
In the case OF a manufacturer
cost means the cost OF raw mater
ials and supplies. expenditures for
labor and indirect costs incident to
production, including a reasonable
proportion of management expenses,
but not including any cost of selling
or securing return on capital.
Market means the current bid
price prevailing at the date of the
inventory for the praticular mer-
ehandise. The burden of proof as
TO the correctness of the price rests
upon the taxpayer in each case.
Where no open market quotations
are available, the taxpayer must use
such evidence of fair market price
at the dates nearest the inventory
as may be available, such as specific
transactions or compensation paid
for cancellation of contracts or pur-
chase commitments. Where. be-
cause of abnormal conditions the
taxpayer has regularly sold mer-
chandise at prices lower than the
market bid price. the inventory may
be valued at such prices. The cor
termined by reference to the actual
sales of the taxpayer for a reason
able period before and after the
date of inventory. Prices which vary
materially from the actual prices
so ascertained will not be accepted
as rejecting the market.
'The value of each item in the
inventory may be measured by cost
or market, which ever is lower. An
entire stock may not be inventor led
at cost and also at market price,
and the lower of the two inventories
used. Inventories on whatever
basis taken will be subject to inves-
tigation by the Commissioner of In
ernal Revenue, and the taxpayer
must satisfy the Commissioner of
the correctness of the prices adopt
ed. He must be prepared to show
both the cost and the market price
of each article included in the in
yentory.
I'm the conduct OF modern bust
ness, IL Is of the utmost importance
whether corporation, partnership or
individual, shall maintain an exact
record of receipts and expenses. No
special system of accounts is pre-
scribed by the Bureau of Internal
Revenue, but the books should show
In detail inventories, purchases,
sales, capital investments. deprecia-
tion. and similar items required in
making up income tax returns"
Important changes in income
tax procedure directed by Commits
sioner David H. Blair are embodied
In treasury decision effective De-
cember 18th, which provides for the
prompt adjustment OF claims for re-
fund and abatement of Federal
Taxes.
Heretofore when an over assess
ment OF over payment was disclosed
py the audit of an income tax re-
turn, the taxpayer was invited to
hle claim for the abatement of the
over assessment of the refund of the
overpayment. When received the
claim was registered and filed away
until reached In due course for con-
sideration. Because of the large
number of such claims filed delay in
adjustment necessarily resulted