Court Opinion

ID: 4484832
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:00.635545+00
Date Added: 2024-06-11T14:54:05.187763
License: Public Domain

TURNER, </., dissenting: I agree that section 22 (d) of the code is a provision of general application and that the petitioner, as well as any other taxpayer, may use the method of inventory therein authorized. I do not agree, however, that the petitioner has brought itself within the provisions of that section. In my opinion, the method prescribed contemplates some physical matching of goods on hand at the end of the year with goods on hand at the beginning of the year, and, as near as I am able to determine, the majority opinion does not deny that such is the intendment of the statute, the conclusion being, however, that a matching of dollars as of the beginning and the end of the year constitutes compliance with the statute, even though there is no attempt to show any matching of goods and the number of dollars matched is arrived at by indulging in assumptions on assumptions which “may, and generally do,” vary from the facts. Such assumptions are indulged in both as to cost and as to the goods themselves. To illustrate: The retail method of inventory itself assumes the cost of goods on hand to be the listed retail price reduced by the use of a factor which represents the average “mark-on” made on goods during the year but without regard to the actual cost of the specific goods which constitute the closing inventory. Next, for the purposes of applying section 22 (d), it is assumed that the goods are fungible and that those on hand at the end of the year are of the same type and quality as the goods on hand at the beginning of the year, while admitting that they “may, and generally do, differ considerably as to type, quality, and price.” By this method, which the majority opinion approves, the petitioner arrives at a “cost” for the goods in his closing inventory which, though it may not even approximate, is assumed to have been, the cost of such goods on hand at the beginning of the year, and this, even though in fact there may not have been any such goods on hand at the beginning of the year. Such indulging in assumption on assumption, or piling of fiction on fiction, does not in my opinion result in an inventory reflecting facts or actualities, and the use of such a method does not offer any assurance that there will be anything'approximating a clear reflection of income. The fact that inventory by the last in, first out method permits the indulgence in one assumption, namely, that goods in the closing inventory may be listed at the cost price of the first of such goods on hand during the taxable year, is not, in my opinion, to be regarded as a license to indulge in fiction to the extent here approved. If the petitioner desires the benefits which may be had under section 22 (d), it should be willing, and in my opinion is required, to show factual compliance. I accordingly note my dissent. Harlan, J., agrees with this dissent.