Texas Corporation disassembles old automobiles for the purpose of reselling their compo – nents…
Texas Corporation disassembles old automobiles for the purpose of reselling their compo – nents (i.e., different types of metals, plastics, rubber, and ocher mater ials). Texas sells some of the items for scrap, but must pay to dispose of environmenta lly hazardous plastics and rubber. At year-end, Texas Corpora tion has a difficult rime determining the cost of the individual parts that are stacked in piles. In fact, it would be very expensive to even weigh some of the materia ls on hand. Texas has followed the practice of having two experienced employees estimate the weight of different stacks and then price them based on quotes found in trade journals . If Texas must pay to dispose of an item, it is assigned a value of zero . In other words, Texas does not value its inventory using standard FIFO or LIFO methods . Is such a practice acceptable?
A partial list of research sources is:
• Reg. Secs. 1.471 -2(a) and 1.471 -3(d)
• Morrie Chait/en, 1978 PH T.C. Memo 178,006, 37 TCM 17
• Justus & Parker Co., 13 BTA 127 (1928)