Photo-Sonics, Inc. v. Commissioner of Internal Revenue

ELY, Circuit Judge:

We face a petition for review of a Tax Court decision upholding the assessment of a deficiency in the payment of income taxes. The decision is reported at 42 T.C. 926 (1964). The petitioning taxpayer properly invokes our jurisdiction under sections 7482 and 7483 of the Internal Revenue Code of 1954.

The controversy stems from taxpayer’s method of accounting for its inventory of goods which it manufactured. Under the method, generally described as “prime costing” or “prime cost”, only the cost of direct labor and materials were allocated to inventory value. No portion of…