Mohave County miner and our mineral wealth., 1921-01-14
RECENT RULING ON
 INCOME TAX CLAUS
Merchants Attention!

oSoS Article 1882 as follows:
 Valuation of inventories:-Inven- tories must be valued at (a) cost or -(b) cost of market, as defined in Ar ticle 1884 as amended, which ever is lower. (See Article 1885 for Inven- tories by dealers in securities.) Which ever basis is adopted must be applied consistently to the entire inventory. A taxpayer may, regardless of his past practice, adopt the basis of "cost or market value which ever is lower" for his 1920 inventory, provided dis closure of the fact and that it rep resents a change are made in the re- turn. Thereafter changes can be made only after permission is secured from the, Commissioner. Inventories should be recorded in a legible manner, prop erly computed and summarized, and should be preserved as part of the accounting records of the taxpayer. Goods taken in the inventory which have been so intermingled that they cannot be identified with specific in- voices will be deemed to be the goods most recently purchased.
 T. D. 3109 amends Article 1884 and T. D. 3047 as follows:
 Inventories at Market:-Under or dinary circumstances "market" means the current bid price prevailing at the date of the inventory for the partic- ular merchandise in the volume in which ordinarily purchased by the taxpayer. This method of valuation is applicable in the bases (a) of goods purchased and on hand, (b) of basic elements of cost materials, labor and burden) in goods in process of 'manu- facture, and (c) of finished goods on hand; exclusive, however, of goods or hand or in process of manufacture fol delivery upon firm sales contracts at fixed prices entered into before the date of the inventory, which goods must be inventoried at cost. Where no open market quotations are avail able, the taxpayer must use such evi- dence of a fair market price at the date or dates nearest the inventory as may be available, such as specific transactions in reasonable volume en- tered into in good faith, or compen, sation paid for cancellations of con- tracts for purchase commitments where, owing to abnormal conditions the taxpayer has regularly sold such merchandise at prices lower than the current bid price as above defined, the inventory may be valued at such prices, and the correctness of such prices will be determined by reference to the actual sales of the taxpayer for a reasonable period before and af' ter the date of the inventory. Prices which vary materially from the actual prices so ascertained will not be ac' cepted as reflecting theI market anc the penalties prescribed for filing false and fraudulent returns may be asserted. \ Goods in process of manu facture may be valued for purposes of the inventory on the lowest of tht following bases: CD the replacement or reproduction cost prevailing at tht date of the inventory; or (2) the prop CT proportionate part of the actua finished cost; or, under abnormal con ditions, (3) the proper proportionat' part of teh sale price of the finished l product, account being taken in al cases of the proportionate part of th total cost of basic elements (mater ials, labor and burden) represented il such goods in process of manufactur at the stages at which they are foun' on the date of the inventory. The in vehtories of taxpayers on whateve basis taken will be subject to investi gation by the Commissioner, and tn taxpayer must satisfy the Commis sioner of the correctness of the price adopted. He must be prepared t show both the cost and the marke price of each article included in tn inventory. It is recognized that i the latter part of 1918, by reaso among other things of governments control not having been relinquishec conditions were abnormal and in man commodities there was no such seal of trading as to establish free mal ket. In such a case, when a marke was established during the succeedin year, claim may be filed for an loss sustained in accordance with tn provisions off Section 214 (a) 12 o Section 234 (a) IA of the statute. Sc Articles 261-26S.