53 STAT.] 76TH CONG. , 1ST SESS.-CH. 247-JUNE 29, 1939 TAX. -- and by inserting at the end thereof the following new sub- section: "(b) TAXABLE YEAR BEGINNING PRIOR TO JANUARY 1, 1940.-The provisions of clause (2) of subsection (a) shall not apply to a taxable year beginning prior to January 1, 1940." SEC. 219. INVENTORIES. (a) AMENDMENT TO CoDE. -Section 22 (d) of the Internal Revenue Code (relating to inventories in certain industries) is amended to read as follows: "(d) (1) A taxpayer may use the following method (whether or not such method has been prescribed under subsection (c)) in inven- torying goods specified in the application required under paragraph (2): "(A) Inventory them at cost; "(B) Treat those remaining on hand at the close of the tax- able 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; 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. "(2) The method described in paragraph (1) may be used- "(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 Commis- sioner may prescribe; 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 loss, for credit 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 first taxable year for which the method described in paragraph (1) is to be used. "(3) The change to, and the use of, such method shall be in ac- cordance with such regulations as the Commissioner, with the ap- proval of the Secretary, may prescribe as necessary in order that the use of such method may clearly reflect income. "(4) In determining income for the taxable year preceding the taxable year for which such method is first used, the closing in- ventory of such preceding year of the goods specified in such applica- tion shall be at cost. "(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 determines that the taxpayer has used for any period beginning with or during any subsequent taxable year some procedure other than that specified in sub- paragraph (B) of paragraph (1) in inventorying (for ascer- taining income, profit, or loss, for credit purposes, or for the pur- pose of reports to shareholders, partners, or other proprietors, or to beneficiaries) the goods specified in the application, and requires a change to a method different from that prescribed in paragraph (1) beginning with such subsequent taxable year or any taxable year thereafter, 877 Taxable year begin- ning prior to Janu- ary 1, 1940. Inventories in cer- tain industries. Ante, p. 11 . I.R.C.C . 22 (d). Election of method. Restriction. Regulations as to change, etc. Inventory at cost. Restriction on change of method.
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