Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 68-98

1968-1 C.B. 191

Sec. 446

Sec. 481

Full Text

Rev. Rul. 68-98

The taxpayer valued its inventories on its books and for Federal income tax purposes by using a constant nominal price for the so-called normal quantity of goods in stock. Subsequently, the taxpayer was required by a Federal regulatory agency to change the manner of keeping its books by valuing all goods at cost or market, whichever is lower. However, it did not change the method of valuing inventories in filing its Federal income tax return. Upon examination of the taxpayer's Federal income tax return, the Internal Revenue Service made an adjustment to the opening and closing inventories by valuing all goods at the lower of cost or market.

Held , the adjustment made by the Service to require that the inventories be valued at cost or market, whichever is lower, is a change in method of accounting for Federal income tax purposes, and is a change not initiated by the taxpayer within the meaning of section 1.481-1(c)(3) of the Income Tax Regulations.