Walker Lake bulletin. (Hawthorne, Nev.) 1883-1926, 1921-12-24
Late Income Tax Changes

The following statement is issued by
Collector of Internal Revenue. Mr..
Luois A. Spellier the district of Ne
vada.
Merchants, manufacturers and busi-
ness men generally need experience
no difficulty in takinv their Inventories
for the year 1921 to conform with the
new revenue act. The language OF the
Rvenue Act of 1918 and the Revenue
Act OF 1921, (Sec 205,) relating to in
ventories are identical;
That whenever in the opinion OF
the Commissioner the use of inven-
tories is necessary in order to clearly
determine the income of any taxpay-
er, 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 best
accounting practice in the trade or
business and most clearly reflecting
the income:
Thereafter, the regulations provide,
changes can be made only after per-
mission is obtained from the Commits
sioner of Internal Revenuc.
"In the case of merchant cost
means the invoice price less trade or
other discounts excepting strictly cash
discounts approximating fair rate
of interest, which may be deducted or
not at the option of the taxpayer, pro
viding a consistant course is followed.
To the net invoice price should be
added the cost of transportation and
other necessary charges incurred in ac-
quiring possession of the goods.
"In the case of manufacturer cost
means the cost of raw materials and
supplies, expenditures for labor and in
direct costs incident to production, in
Guiding a reasonable proportion of
management expenses, but not includ-
ing any cost of selling or securing re-
turn on capital.
Market means the current bid
price prevailing at the date of the in
ventory for the particular merchandise
The burden of the proof as to the
correctness of the price rests with
the taxpayer in each case. Where no
open market quotations arc available
the taxpayer must use such evidence
of faii market price at the dates Of
the inventory as may be available,
such as specific transactions or COM
pensation paid for cancellation of con-
tracts or purchase commitments
Where, because of abnormal condi-
tions, the taxpayer has regularly sold
merchandise at prices lower than the
market bid price, the inventory NAV
be valued at such prices. The correct
ness of such prices will be determined
by reference to the actual sales of the
taxpayer for reasonable period be-
fore and after the date of inventory
Prices which vary materially from the
actual prices so ascertained will not
be accepted as reflecting the market.
"The value of each item in the in
vcntory may be measured by cost or
market, whichever is lower. An en-
tire stock may not be inventoricd at
cost and also at market price, and the
lower of the two Inventories used.
Inventories, on whatever basis taken.
will be subjected to investigation by
the Commissioner Of Internal Reve-
nue, and the taxpayer must satisfy
the Commissioner of the correctness
OF the prices adopted He must be
to show both the cost and
the market price of each article in
claded in the inventory.
I'm the conduct of modern busi-
ness, it is of the utmost importance
that every business, large or small,
whether corporation, partnership or
shall maintain an exact rec
ord OF receipts and expenses. No
special system of accounts is pre-
scribed by the Bureau of Internal Rev
enue, but the books should show in
detail, inventories, purchases, sales,
capital investments. depreciation and
similar items required in making up
income tax returns.