All-Steel Equipment, Inc. v. Commissioner
United States Tax Court
The petitioner consistently valued its inventory by use of the prime cost method including in inventory only the cost of direct labor and materials. The respondent determined that such method did not clearly reflect the petitioner's income and that its inventory should be valued by use of the full absorption method.
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The petitioner consistently valued its inventory by use of the prime cost method including in inventory only the cost of direct labor and materials. The respondent determined that such method did not clearly reflect the petitioner's income and that its inventory should be valued by use of the full absorption method. Held (1) the petitioner's method of accounting did not clearly reflect its income; and (2) the respondent did not abuse his discretion in requiring the petitioner to value its inventory by use of the full absorption method.
1Opinion of the Court
OPINION
Gross income, in a merchandising or manufacturing business, means total sales less cost of goods sold. Sec. 1.61-3(a), Income Tax Kegs. The cost of goods sold during a year is determined by subtracting tbe cost of inventory on band at tbe end of tbe year from tbe total of tbe cost of inventory on band at tbe beginning of the year and tbe cost incurred during tbe year in acquiring new inventory.1 Schedule A, Form 1120. Tbe cost of inventory on band at the end of a year becomes tbe cost of opening inventory for tbe next succeeding year. Thus, if an expense is properly allocable to tbe…
2Cases cited25 opinions
- Cohan v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1930
- Brown v. HelveringSupreme Court of the United States · 1934
- Lucas v. Kansas City Structural Steel Co.Supreme Court of the United States · 1930
- Casey v. CommissionerUnited States Tax Court · 1962
- Grant Foster and Barbara Dunn Foster v. Commissioner of Internal RevenueCourt of Appeals for the Fourth Circuit · 1968
20 more not listed; retrieve them via the Exa API.
3Cited by36 opinions
- Commissioner v. Idaho Power Co.Supreme Court of the United States · 1974
- Electric & Neon, Inc. v. CommissionerUnited States Tax Court · 1971
- Madison Gas & Electric Co. v. CommissionerUnited States Tax Court · 1979
- Coors v. CommissionerUnited States Tax Court · 1973
- Thor Power Tool Co. v. CommissionerUnited States Tax Court · 1975
31 more not listed; retrieve them via the Exa API.