Page:United States Statutes at Large Volume 68A.djvu/199

 CH. 1

NORMAL TAXES AND SURTAXES

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(B) which is attributable to the income of the taxable year or prior taxable years for which an election under this section is in effect; and (C) which the Secretary or his delegate is satisfied can be estimated with reasonable accuracy. (2) EXCEPTIONS.—The term "estimated expense" does not include— (A) any deduction attributable to income taken into account in computing taxable income for taxable years preceding the first taxable year for which the election is made; (B) any deduction attributable to prepaid income to which section 452 applies by reason of an election made under such section by the taxpayer; or (C) any deduction allowable under section 166 (relating to bad debts). (e) SPECIAL RULE FOR DEDUCTIONS ATTRIBUTABLE TO PERIOD BEFORE ELECTION.—Any deduction attributable to income taken into

account in computing taxable income for taxable years preceding the first taxable year for which the election is made shall be allowable in the same manner and to the same extent as if this section had not been enacted. Subpart D—Inventories Sec. 471. General rule for inventories. Sec. 472. Last-in, first-out inventories. SEC. 471. GENERAL RULE FOR INVENTORIES.

Whenever in the opinion of the Secretary or his delegate the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer on such basis as the Secretary or his delegate may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. SEC. 472. LAST-IN, FIRST-OUT INVENTORIES. (a) AUTHORIZATION.—A taxpayer may use the method provided in subsection (b) (whether or not such method has been prescribed under section 471) in inventorying goods specified in an application to use such method filed at such time and in such manner as the Secretary or his delegate may prescribe. The change to, and the use of, such method shall be in accordance with such regulations as the Secretary or his delegate may prescribe as necessary in order that the use of such method may clearly reflect income. (b) M E T H O D APPLICABLE.—In inventorying goods specified in the application described in subsection (a), the taxpayer shall: (1) Treat those remaining on hand at the close of the taxable year as being: First, those included in the opening inventory of the taxable year (in the order of acquisition) to the extent thereof; and second, those acquired in the taxable year; (2) Inventory them at cost; and (3) 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. § 472(b)(3)

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