Taxable Years Beginning in 1940 Taxable Years Beginning in 1939 Taxable Years Beginning before 1939 Sec. 22. (c) Inventories.-When Sec. 22. (c) Inventories.-Whenever in the opinion of the Commis-ever in the opinion of the Commissioner the use of inventories is nec- sioner the use of inventories is necessary in order clearly to determine essary in order clearly to determine the income of any taxpayer, inven- the income of any taxpayer, inventories shall be taken by such tax- tories shall be taken by such taxpayer upon such basis as the Com- payer upon such basis as the Commissioner, with the approval of the missioner, with the approval of the Secretary, may prescribe as con- Secretary, may prescribe as conforming as nearly as may be to the forming as nearly as may be to the best accounting practice in the best accounting practice in the trade or business and as most trade or business and as clearly reflecting the income. clearly reflecting the income. most Sec. 22. (d) (1) A taxpayer Sec. 22. (d) (1) A taxpayer mav use Sec. 22. (c) Inventories. See p. 30, Eighth Edition. Sec. 22. (d) Inventories in cer the following method may use the following method tain industries. (whether or not such method has (whether or not such method has been prescribed under subsection heen prescribed under subsection Sec. 22. (d) (1) Producers and (e)) in inventorying goods speci- (c)) in inventorying goods speci- processors of certain non-ferrous fied in the application required fied in the application required metals. under paragraph (2): under paragraph (2): (A) Inventory them at cost; (A) Inventory them at cost; (B) Treat those remaining on (B) Treat those remaining on hand at the close of the taxable hand at the close of the taxable year as being: First, those included year as being: First, those included in the opening inventory of the in the opening inventory of the taxable year (in the order of acqui- tarable year (in the order of acquisition) to the extent thereof, and sition) to the extent thereof, and second, those acquired in the tax-second, those acquired in the taxable year; and able year; and (C) Treat those included in the opening inventory of the taxable year in which such method is first used as having been acquired at the same time and determine their cost by the average cost method. Sec. 22. (d) (2) The method described in paragraph (1) may be used (C) Treat those included in the opening inventory of the taxable year in which such method is first used as having been acquired at the same time and determine their cost by the average cost method. Sec. 22. (d) (2) The method described in paragraph (1) may be used Taxable Years (A) Only in inventorying goods (required under subsection (c) to be inventoried) specified in an application to use such method filed at such time and in such manner as the Commissioner may prescribe; and Taxable Years (A) Only in inventorying goods (required under subsection (c) to be inventoried) specified in an application to use such method filed at such time and in such manner as the Commissioner may prescribe; and Taxable Years (A) Only in inventorying goods (required under subsection (e) to be inventoried) specified in an application to use such method filed at such time and in such manner as the Commissioner may prescribe; and (B) Only if the taxpayer estab(B) Only if the taxpayer estab- (B) Only if the taxpayer establishes to the satisfaction of the lishes to the satisfaction of the lishes to the satisfaction of the Commissioner that the taxpayer has Commissioner that the taxpayer has Commissioner that the taxpayer has used no procedure other than that used no procedure other than that used no procedure other than that specified in subparagraphs (B) and specified in subparagraphs (B) and specified in subparagraphs (B) and (C) of paragraph (1) in inventory-(C) of paragraph (1) in inventory- (C) of paragraph (1) in inventory(C) of paragraph (1) in inventory-ing (to ascertain income, profit or ing (to ascertain income, profit or ing such goods to ascertain the less, for credit purposes, or for the less, for credit purposes, or for the income, profit, or loss of the first purpose of reports to shareholders, purpose of reports to shareholders, taxable year for which the method partners or other proprietors, or to partners or other proprietors, or to described in paragraph (1) is to be beneficiaries) such goods for any beneficiaries) such goods for any used, for the purpose of a report period beginning with or during the period beginning with or during the or statement covering such taxable first taxable year for which the first taxable year for which the year (i) to shareholders, partners, method described in paragraph (1) method described in paragraph (1) or other proprietors, or to bene- is to be used such goods to ascer- is to be used such goods to ascerficiaries, or (ii) for credit purposes. tain the income, profit, or loss of tain the income, profit, or loss of the first taxable year for which the the first taxable year for which the method described in paragraph (1) method described in paragraph (1) is to be used, for the purpose of a is to be used, for the purpose of a report or statement covering such report or statement covering such taxable year (i) to shareholders, taxable year (i) to shareholders, partners, or other proprietors, or to partners, or other proprietors, or to beneficiaries, or (ii) for credit pur-beneficiaries, or (ii) for credit pur poses. poses. Sec. 22. (d) (3) The change to, and the use of, such method shall be in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect income. Sec. 22. (d) (3) The change to, and the use of, such method shall be in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect income. Sec. 22. (d) (4) In determining Sec. 22. (d) (3) The change to, and the use of, such method shall be in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect income. Sec. 22. (d) (4) In determining Sec. 22. (d) (4) In determining income for the taxable year preced-income for the taxable year preced-income for the taxable year preced ing the taxable year for which such method is first used, the closing inventory of such preceding year of the goods specified in such application shall be at cost. ing the taxable year for which such ing the taxable year for which such method is first used, the closing inventory of such preceding year of the goods specified in such application shall be at cost. Sec. 22. (d) (5) If a taxpayer, Sec. 22. (d) (5) If a taxpayer, Sec. 22. (d) (5) If a taxpayer, having complied with paragraph having complied with paragraph having complied with paragraph (2), uses the method described in (2), uses the method described in (2), uses the method described in paragraph (1) for any taxable paragraph (1) for any taxable year, then such method shall be used in all subsequent taxable years unless (A) With the approval of the Commissioner a change to a different method is authorized; or year, then such method shall be unless (A) With the approval of the Commissioner a change to a different method is authorized; or (B) The Commissioner deter- (B) The Commissioner determines that the taxpayer has used mines that the taxpayer has used for any such subsequent taxable for any period beginning with or year some procedure other than that during any subsequent taxable year specified in subparagraph (B) of some procedure other than that paragraph (1) for any taxable year, then such method shall be used in all subsequent taxable years unless (A) With the approval of the Commissioner a change to a different method is authorized; or (B) The Commissioner determines that the taxpayer has used for any period beginning with or during any subsequent taxable year some procedure other than that (A) Only in inventorying goods (A) Only in inventorying goods (required under subsection (c) to (required under subsection (c) to be inventoried) specified in an ap-be inventoried) specified in an application to use such method filed plication to use such method filed at such time and in such manner as at such time and in such manner as the Commissioner may prescribe; the Commissioner may prescribe; and and (B) Only if the taxpayer establishes to the satisfaction of the Commissioner that the taxpayer has used no procedure other than that specified in subparagraphs (B) and (C) of paragraph (1) in inventorying (to ascertain income, profit, or lose, for credit purposes, or for the purpose of reports to shareholders, partnere, or other proprietors, or to beneficiaries) such goods for any period beginning with or during the first taxable year for which the method described in paragraph (1) is to be used such goods to ascertain the income, profit, or loss of the first taxable year for which the method described in paragraph (1) is to be used, for the purpose of a report or statement covering such taxable (B) Only if the taxpayer establishes to the satisfaction of the Commissioner that the taxpayer has used no procedure other than that specified in subparagraphs (B) and (C) of paragraph (1) in inventorying (to ascertain income, profit or lese, for eredit purposes, or for the purpose of reports to shareholders, partners or other proprietors, or to beneficiaries) such goods for any period beginning with or during the fret taxable year for which the method described in paragraph (1) is to be used such goods to ascertain the income, profit, or loss of the first taxable year for which the method described in paragraph (1) is to be used, for the purpose of a report or statement covering such taxable year (i) to shareholders, partners, or other proprietors, or to beneficiaries, or (ii) for credit pur-year (i) to shareholders, partners, poses. Sec. 22. (d) (3) The change to, and the use of, such method shall be in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect income. or other proprietors, or to bene- Sec. 22. (d) (3) The change to, Sec. 22. (d) (4) In determining Sec. 22. (d) (4) In determining income for the taxable year preced-income for the taxable year preceding the taxable year for which such method is first used, the closing inventory of such preceding year of the goods specified in such application shall be at cost. Sec. 22. (d) (5) If a taxpayer, having complied with paragraph (2), uses the method described in paragraph (1) for any taxable year, then such method shall be used in all subsequent taxable years unless (A) With the approval of the Commissioner a change to a different method is authorized; or ing the taxable year for which such tion shall be at cost. Sec. 22. (d) (5) If a taxpayer, having complied with paragraph (2), uses the method described in paragraph (1) for any taxable year, then such method shall be used in all subsequent taxable years unless (A) With the approval of the Commissioner a change to a different method is authorized; or (B) The Commissioner deter- (B) The Commissioner determines that the taxpayer has used mines that the taxpayer has used for for any period beginning with or any period beginning with or during during any subsequent taxable year any subsequent taxable year come some procedure other than that | procedure other than that specified Taxable Years Beginning before 1939 Taxable Years Taxable Years Taxable Years paragraph (1) in inventorying the specified in subparagraph (B) of specified in subparagraph (B) of goods specified in the application paragraph (1) in inventorying (for paragraph (1) in inventorying (for to ascertain the income, profit, or ascertaining income, profit or loss, ascertaining income, profit or less, loss of such subsequent taxable for eredit purposes, or for the pur for credit purposes, or for the pur year for the purpose of a report pose of reports to shareholders, pose of reports to shareholders, or statement covering such taxable partners, or other proprietors, or partners, or other proprieters, or year (i) to shareholders, partners, to beneficiaries) the goods specified to beneficiaries) the goods specified or other proprietors, or benefici- in the application and requires a in the application and requires a aries, or (ii) for credit purposes; change to a method different change to a method different from and requires a change to a method from that prescribed in para- that prescribed in paragraph (1) different from that prescribed in graph (1) beginning with such beginning with such subsequent taxparagraph (1) beginning with such subsequent taxable year or any taxable year or any taxable year subsequent taxable year or any able year thereafter such subsequent thereafter such subsequent taxable taxable year thereafter. taxable year some procedure other year some procedure other than than that specified in subparagraph that specified in subparagraph (B) (B) of paragraph (1) in inventory- of paragraph (1) in inventorying ing the goods specified in the appli- the goods specified in the applicacation to ascertain the income, tion to ascertain the income, profit, profit, or loss of such subsequent or loss of such subsequent taxable taxable year for the purpose of a year for the purpose of a report report or statement covering such or statement covering such taxable taxable year (i) to shareholders, year (i) to shareholders, partners, partners, or other proprietors, or or other proprietors, or beneficibeneficiaries, or (ii) for credit pur-aries, or (ii) for credit purposes; poses; and requires a change to a and requires a change to a method method different from that pre- different from that prescribed in scribed in paragraph (1) beginning|paragraph (1) beginning with such with such subsequent taxable year subsequent taxable year or any or any taxable year thereafter. taxable year thereafter. In either of the above cases, the change to, and the use of, the different method shall be in accordance with such regulations as the In either of the above cases, the change to, and the use of, the different method shall be in accordance with such regulations as the In either of the above cases, the change to, and the use of, the different method shall be in accordance with such regulations as the Commissioner, with the approval Commissioner, with the approval Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect in come. Sec. 22 (d) (2) (B) and (d) (5) (B), I. R. C., supra, amended by Sec. 118 (a) and (b), R. A. of 1942, to read as above. Sec. 118 (c) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 22 (d), I. R. C.. before amendment, see 1942 column. of the Secretary, may prescribe as come. Sec. 22 (d), I. R. C., supra, amended by Sec. 219 (a), R. A. of 1939, as shown in ordinary type before omission of language in stricken through type and addition of language in italics. Sec. 219 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 22 (d), I. R. C., before amendment, see fn. 5. 5 Sec. 22 (d), I. R. C., as originally enacted reads as follows: Sec. 22 (d) Inventories in certain industries.— (1) PRODUCERS AND PROCESSORS OF CERTAIN NONFERROUS METALS.-A taxpayer shall be entitled to elect the method of taking inventories provided in paragraph (2) if his principal business is (A) Smelting non-ferrous ores or concentrates, or refining non-ferrous metals, or both; or (B) Producing brass, copper products, or brass products, or any one or more of them, not further advanced than rods, sheets, tubes, bars, plates, or strips. (2) INVENTORIES OF RAW MATERIALS.-A taxpayer entitled to elect, and who has so elected, shall, in taking his inventory as of the close of any taxable year of raw of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect in come. Sec. 22 (d), I. R. C., supra, amended by Sec. 219 (a), R. A. of 1939, as shown in ordinary type before omission of language in stricken through type and addition of language in italics. Sec. 219 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 22 (d), I. R. C., before amendment, see fn. 5. (C) so intermingled that they cannot be identified with specific invoices; treat such raw materials remaining on hand as being: First, those included in the inventory as of the beginning of the taxable year (in the order of acquisition) to the extent thereof, and second, those acquired in the taxable year, in the order of acquisition. (3) TANNERS.-A taxpayer whose principal business is tanning hides or skins, or both, shall be entitled to elect (with respect to any taxable year) the method in subparagraph (B) of paragraph specified in subparagraph (B) of In either of the above cases, the change to, and the use of, the different method shall be in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect in come. Sec. 22 (d), I. R. C., supra, amended by Sec. 219 (a), R. A. of 1939, as shown in ordinary type before omission of language in stricken through type and addition of language in italics. Sec. 219 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. Taxable Years or (ii) for credit purposes; In either of the above cases, the Sec. 22 (d), I. R. C., supra, amended by Sec. 219 (a), R. A. of 1939, to read as shown above in italics before any italics were stricken through and before addition of underlined italics. Sec. 219 (b) of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1938. For Sec. 22 (d), I. R. C., before amendment, see fn. 5. For Sec. 22(d), I. R. C., before amendment, see fn. 5. provided in paragraph (2) as to the raw materials (including those included in goods in process and in finished goods) in the business of tanning hides, or skins, or both, if so intermingled that they cannot be identified with specific invoices. (4) INVENTORIES AT COST.-In the case of the application of the provisions of paragraph (2) or (3) all inventories of such materials shall be taken at cost, including the inventory as of the close of the preceding taxable year even though such preceding taxable year began prior to January 1, 1939. (5) ELECTION OF METHOD.— The method provided in paragraph (2) or (3) shall not be applied unless the taxpayer, at or before the filing of his return for the preceding taxable year, has filed with the Commissioner his election to have it apply. Sec. 22. (d) (5) Election of See p. 32, Eighth Edition. Sec. 22. (d) (6) Regulations as to change. See p. 32, Eighth Edition. Sec. 22. (d) (7) Change to different method. See p. 32, Eighth Edition. Retroactivity See Sec. 219 (c), R. A. of 1939, in fn. 6, for retroactive effect of amendment of Sec. 23 (d), I. R. C. (1939 column) by Sec. 219 of (a), R. A. 1939. (6) REGULATIONS AS TO CHANGE.-The change to such method shall be made in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe as necessary to prevent the avoidance of tax. (7) CHANGE TO DIFFERENT METHOD.-An election made under this subsection shall be irrevocable and the method so elected shall be applied in all subsequent taxable years notwithstanding any change in the principal business of the taxpayer, unless with the approval of the Commissioner change to a different method is authorized, and then upon such terms and conditions and in accordance with such regulations as the Commissioner, with the approval of the Secretary, may prescribe. 6 Sec. 219 (c), R. A. of 1939, provides as follows: |