Page:United States Statutes at Large Volume 68A.djvu/200

 160

INTERNAL REVENUE CODE OF 1954

(c) CONDITION.—Subsection (a) shall apply only if the taxpayer establishes to the satisfaction of the Secretary or his delegate that the taxpayer has used no procedure other than that specified in paragraphs (1) and (3) of subsection (b) in inventorying such goods to ascertain the income, profit, or loss of the first taxable year for which the method described in subsection (b) is to be used, for the purpose of a report or statement covering such taxable year— (1) to shareholders, partners, or other proprietors, or to beneficiaries, or (2) for credit purposes. (d) PRECEDING CLOSING INVENTORY.—In determining income for the taxable year preceding the taxable year for which the method described in subsection (b) is first used, the closing inventory of such preceding year of the goods specified in the application referred to in subsection (a) shall be a t cost. (e) SUBSEQUENT INVENTORIES.—If a taxpayer, having complied

with subsection (a), uses the method described in subsection (b) for any taxable year, then such method shall be used LQ all subsequent taxable years unless— (1) with the appro vail of the Secretary or his delegate a change to a different method is authorized; or, (2) the Secretary or his delegate determines that the taxpayer has used for any such subsequent taxable year some procedure other than that specified in paragraph (1) of subsection (b) in inventorying the goods specified in the application to ascertain the income, profit, or loss of such subsequent taxable year for the purpose of a report or statement covering such taxable year (A) to shareholders, partners, or other proprietors, or beneficiaries, or (B) for credit purposes; and requires a change to a method different from that prescribed in subsection (b) beginning with such subsequent taxable year or any taxable year thereafter. If paragraph (1) or (2) of this subsection applies, the change to, and the use of, the different 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. (f) CROSS R E F E R E N C E. — For provisions relating to involuntary liquidation and replacement of LIFO inventories, see section 1321.

PART III—ADJUSTMENTS Sec. 481. Adjustments required by changes in method of accounting. Sec. 482. Allocation of income and deductions among taxpayers. SEC. 481. ADJUSTMENTS REQUIRED BY CHANGES IN METHOD OF ACCOUNTING. (a) GENERAL RULE. — I n computing the taxpayer's taxable income

for any taxable year (referred to in this section as the "year of the change")— (1) if such computation is under a method of accounting different from the method under which the taxpayer's taxable income for the preceding taxable year was computed, then (2) there shall be taken into account those adjustments which are determined to be necessary solely by reason of the change in § 472(c)

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