The Alaska daily empire., 1921-12-27
EXPLANATION ON INVENTORIES IS
 GIVEN OUT NOW
New Collector Poe Sets Forth Explanations to Mer-
 chants and Others.

The following statement is issued by Collector of Internal Revenue Burns Foe. of the district of Wash mgtoa, headquarters at Tacoma, Wash: lt.
 Merchants, manufacturers and business men generally need expert ence TO difficulty in >takings their ii- vartories for the year 1921 to con form with the new revenue act. Tlte language of the Revenue Act of 19.S and the Revenue Act of 1921, (Sec. 2G3l, relating to inventories, are idertical:
 That whenever in the opinion Of la CJ4rissioner the use of inven- tories i3 necessary in order clearly to determine the income of any tax Iayer, inventories shall be taken by such taxpayer upon such basis as the missioner, with the approval Of the Secretary. may prescribe as con forming as nearly as may be to the best accounting practice in the trade or business and as most clearly re- fiecting 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 l,heir Inventories for 1920. There after, the regulations provide, changes can be made only after per mission is obtained from the Com missioner of Internal Revenue. Merchant "Cost'
 On ba nf T11nrphant tanc.t' means the invoice price less trade or other discounts, excepting strictly caeh discounts approximating a fair rate of interest, which may be de- ducted or not at the option of the taxpayer, providing consistent course is followed To the net in voice price should be added the cost Of transportation and ether necessary charges incurred in acquiring posses sion of the goods.
 'In the case of a manufacturer icoH' means the cost of raw mate rials and supplies, expenditures for labor and indirect costs incident to rroduction, including a reasonable proportion of management expenses, but not including any cost of selling or securing, return on capital.
 Market"
 Market means the current bid rrice prevailing at the date of the inventory for the particular mer- chardise.. The burden of proof as to the correctness of the price rests llTonl the taxpayer in each case Where no open market quotations are available, the taxpayer must Us 2 such evidence of a 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, because of abnormal conditions the taxpayer has regularly sold merchandise at prices lower than the market bid price, the inventory may be valued at such prices. The correctness of such prices will be determined by refer ence to the actual sales of the tax payer for reasonable period before and after the date of inventory. Prices which vary materially afrom the actual prices so asc srtained will not be accepted as reflecting the market.
 l Inventories
 ''The value of each item in the in- ventory may be measured by cost or market, whichever is lower An en- tire stock may not be inventoried at cost and also at market price, and the lever of the two inventories used. Inventories on whatever basis taken will be, subject to inyestiga- tion by the Commissioner of Internal