The public ledger. [volume] (Maysville, Ky.) 1913-1968, 1921-12-19
COLLECTOR TELLS
HOW INVENTORY
SHOULD BE TAKEN
Collector Lucas Makes 0illcIai State.
ment on Inventory Under
Revenue Law.

The following statement Ia issued
by Collector OF Internal Revenue Rob
ert II. Lucas. district of Kentucky.
Merchants. manufacturers and
business men generally need expert
ence no difficulty In taking their In
ventories for the year 1921 to conform
with the new revenue act The Ian
guage OF the Revenue Act Of 1918 and
the Revenue Act Of 1921, (Sec. 2O3)
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 taxpay-
er, inventories shall be taken by such
taxpayer upon such basis as the Com
missioner, with the approval Of the
Secretary, my prescribe as conform
Ing as nearly as may be to the best
accounting practice in the trade or
business and as most clearly reflect
Ing 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 marke:
basis. whichever Is lower in takily
their inventories for 1920. Thereafter,
the regulations provide, changes can
be made only after permission is OBJ
tanned from the Commissioner of In
trenal Revenue.
In the case of a merchant cost |
means the invoice price less trade CT |
other discounts, excepting strictly |
cash discounts approximateing a fair
rate Of interest, which may be de-
Quoted or not at the option of the tax
payer, providing consistent course !.
is followed. To the net invoice price |
should be added the cost of transport !
alton and other necessary charged in
CURED in acquiring possession Of the
goods.
"In the case of a manufacturer |
cost means the cost of raw materials /!
and supplies expenditures for labor
and indirect costs incident to produc-
ton, including a reasonable proper
ton of management expenses, but moi
including any cost Of selling or Sc
curing return on capital.
Market means the current bid
price prevailing at the date of the in
ventory for the particular merchan
disc. The burden fproof as to tn
correctness of the price rests upon
the taxpayer in each case. Where Nc
open market quotations are available,
the taxpayer must use such evidence
of fair market price at the dates
nearest the inventory as may be avil-
able such as specific transactions c.
compensation pal dior cancellation Of
contracts or purchase commitments
Where, because of abnormal condi-
tons the taxpayer has regularly sold
merchandise at prices lower than the
market bid price, the inventory may
be valued at such prices. The recceet-
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 MIRA
ket.
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 lower fthe two inventories used.
Inventories on whatever basis taken
will be subject to investigation by tie
Commissioner of Internal Revenue.
and the taxpayer must satisfy the
Commissioner of the correctness of