Document RRwVqX1OQNVn1ndqZMDaRzkz

f\ 0 J *4 0 i *\* : * s 1 i L IA216 57 .- -.. <. 5*w^.gaijtf5tai~ji,*-c,ae-.-w^.. -%U> LEAD INDUSTRIES ASSOCIATION Graybar Building, 429 Lexington Avanua Naw York. N. Y. Itxrdi 0, 2937. To Member* cf tha Land Induatriaa AMociationt Sub.1 act; formal Stock Method of Calculation of Profit* inventory Valuation for Corporate mad Tax Purpoeo*. Pjesae recall the action which vaa taken by tha Land Induatriaa xasociation, throng it* Xxocntiva Casalttee, in June, 1936, an tha Adoption of * raeola tion on tha na of tha Pomal Stock Method of Calcu lation of Profit* and Inventory Valuation for Corporate and Tax Purpo***. Thrcxjgh the eoartaay of Mr. W. 2. Paleubat, of Poison, Palcrubet * Company, I aa (ubulttluf the attached eunrsary of what ha* been dona in Vaohin^ton to accomplish the txirpo*e of our r**olntlon, and making aoc^wAtlms for for your conaldaration. Heepaetfully aubndttad. Sacretary. ` mijfm 'wruaipjjw *iiiiii..,i^ ' iwtjyi j * swws+ Ll4?l65fi ~? following hearing* before the Sonata finance Caasdttoa on th 1936 Revenue Act, representatives of various taxpayer# anil associations hare, at the suggestion of the Committee, bean la touch rlth officials of tha Treasury Department and the Bureau of Internal Revenue, with a vljw to obtaining relief from taxation of unrealised ani uL^letrlbutable profit* which result# frost tha application of the so-called firet-ln flrst-out method la valuing Inventories and in determining the cost of goods sold. It "was the Senate Committee's recommendation that tha relief should be sought through amendment of the Treasury Department Regulations or through a Treasury decision, rather than by new legislation, slnco the Comolaeloner already has power to grant the relief. A The case for permitting a method of costing sales or of inventor? valuation which would have the effect of applying ear- rent costs to c"r-ent sale* In those Industries in which a largo and constant volume of raw material must 'at all tins# be main tained in inventory, has been presented to various officials of the Treasury Department and Bureau of Internal Serenas. Site situation ot the present time s u it be summed up as one which shows very aubst-. ntial progress towards the granting of some relief to the industries affected, but It Is still impossible to State la exactly what fora or at exactly what time thie relief can be ex pected. As a result of this, the General Counsel's office of the Treasury Dop-rfcsent was asked what. If any, steps could or should be taken by the taxpayer who desired to make certain that if any changes In regulations era made, or If any decision was handed \ down penaltting the use of a method which would allow current costs to be applied to current sales, they would apply to hta \r j federal Income tax return for 1937. I The General Counsel's office replied that la all proba / bility any relief would apply to the year 1937 as It would appear to be Inequitable to Interpose a delay of one year between the granting of relief and Its application to the case of an Individual taxpayer. The General Counsel' office also stated, however, that If a taxpayer wished to protect hie rights more certainly, he could apply beforo the expiry of ninety days from the beginning of the calendar year 1937 or a fiscal year ending after December 31. 1937 tinier the authority granted to the Canal sslonerundcr Article 41->I of Regulations 9d, for permission to adopt a method of accounting .i which would have the effect of applying the cott of current pur chases or production to current sales. The General Counsel's of fice stated that these application* would be held without prejudlc* until seme decision had been arrived at In the Treasury Department and the bureau of Internal Revenue on the question of lndustrlaa where constant volume of raw materials must at all times be main tained In inventory. The effect of this treatment of such an application would appear to b equivalent to an indefinite extension until such time as the question was settlsd. wsasRswpwjpe'S" t. vWMny.iwvi|l^wi.^wvja)J^^y^;!yi*rWjgJWwi; " ~............. wy^wyigiiW11. rg.yy' LIA21659 2- Although It is impossible to go into complete details hero, there Is reason to believe that some change la regulations or some decision covering this point will be node before the close of the current /ear. A fora of application for change in accounting method Is enclosed. It la suggested that If /on vlth to protect your rights in this matter, 'he application should be filled oat and signed and returned to the office of this association. If any decision Is reached on these ssattere by the 5rearary Department before Uarch 31, the appli cation will be unnecessary and will be returned to you. If, however, as now seems most probable, no decision Is reached, the abdication will be filed and your rights will be protected. It is suggested that you make your decision as to the filing of this apolicatlon without delay, after consultation with yoor counsel. If necessary, although the farm of application enclosed has already been passed on by counsel familiar with the situ ation. o - i - '"Tfs Lrti I >ni m > m n v u 4^yw wgiltniiij LIA21660 (iuuax? : ay ippixcixiux) Commissi oner of Internal Revenue, Bureau of Internal Revenua, lashlngtcn, D. C. ; Bear Sir* The Company, In accordance with article 41-2 of Regulations 94, harehr applies for permission to adopt a method of account ing, for the rear 1937 and. subsequent rears, which will have the effect of applying the cost of current pur chases or production to current sales. The proposed method of accounting will result In a different treatment of Inventories and of the coet of goods sold, Is order to avoid the serious distortion of the Company's Income which results from the method heretofore prescribed. Bo items will be duplicated or emitted as a result of the proposed change, ae Inventories at the beginning of the year 1937 would be maintained at the price of the closing Inventories for 1936. The Treasury Department now has under consideration tho general question whether such a aelbod of accounting should be oersltted in respect of certain classes of taxpayers who areangagod In Industries where largo and constant volm-tyef raw material must at ell times bs maintained In Inventories. This application is filed In order to fully protect the right of thl Company to ndopt such proposal method of accounting for th taxable roar 1937 In tba event that the method Is hereafter recognigsed hy the Treasury Department. It Is respectfully requested that action upon this application bs withhold pending a decision by the Department on the general question. In the event that an appropriate method of accounting eahodying the above principles Is authorised, either by amendment of the statute or Regulations, or by decision or ruling, support ing Information and data establishing the application thereof tr this Cocpsny will be submitted. Respectfully, t raBBse; vr* *i