Pueblo chieftain., 1921-12-19
EASY TO CONFORM TO new US,
REVENUE ACT IT IS CLAIMED

Merchants. manufacturers and busi-
ness 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. 2o3), relating to in
ventories are Identical:
That whenever in the opinion Of
the commissioner the use of inventor
les Is necessary in order clearly to de-
termine the income of any taxpayer.
inventories shall be taken by such tax
payer upon such basis as the commits
stoner. with the approval Of the sec
rotary, may prescribe as conforming
as nearly as may be to the best ne
counting practice in the trade or busi-
ness and as most clearly reflecting 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 past
practice, to adopt the cost or market
basis. whichever is lower in taking
their inventories for 1920. Thereafter,
the regulations provide, changes can
be made only after permission IL cb-
tanned from the commissioner OF inter
nal revenue.
In the case OF merchant cost
means tie IHNClCe DIice iess tiduG VI
other discounts. excepting strictly
cash discount approximating fair
rate OF interest. which may be de-
Quoted or not at tho option OF the tax
payer. providing a consistent course
ID followed. To the net invoice price
should be added the cost OF transpor
tation and other necessary charges III
CURED In acquiring possession OF the
goods.
In tho case OF a manufacturer 'ccst
means the cost OF raw materials and
supplies. expenditures sOr labor and IN
direct costs incident to production in
cluding n 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 inventory
for the particular merchandise. The
burden OF proof as to tho correctness
OF the price rests upon the taxpayer in
each case. Where no opNa market
quotations are available. the taxpayer
must use such evidence OF u fair
market price ut the dates nearest the
inventory as may be available, such as
specific transactions or compcnsn ton
paid for cancellation Of contracts or
purchase commitments. Where, be-
cause OF abnormal conditions the tax
payer has regularly sold merchandise
at pflC5c IoWtT tHdn tuc Hibiftt
price. the inventory may be valued Mt
such prices. The correctness of such
prices will be determined ny reference
to the actual sales of the taxpayo- for
a reasonable period before and rftcr
the date of inventory. Prices which
vary materially from the actual prices
SO asoertaincd will not be accepted as
reflecting tho market.
The value OF each item IN inc inver-
tory may be measured by cost or mar
ket. whichever Is lower. An entire
stock may not be inventoried at cost
and also at market price. and the
lower of the two inventories used. In
ventortes on whatever basis taken win
bc subject 10 investigation by the
commissioner OF internal revenue. and
the taxpayer must satisfy the commits
sioncr OF the correctness of the prices
adopted. He must be prepared TO show
both the cost and the market price ot
each article included in the inventory.
In the conduct OF modern business.
II Is of the utmost importance that
every business. large or small. wh.i he r
corporation. partnership or individual.
shall maintain an exact record 1f re-