The Multi Department store takes physical inventories at each of its 300 stores on various dates between August 1 and September 30th each year.The company's tax year ends on the Monday closest to January 31st.The company's reduction in inventory due to breakage and theft after the last physical inventory in September 2014:
A)Cannot be determined until the physical inventory is actually taken and therefore breakage that occurs in December 2014 will not be deductible until the year ending in January 2015.
B)Must be delayed until the inventory has been taken as a result of the all-events test.
C)Can be estimated and deducted for the year ending in January 2015.
D)Can be estimated and deducted as of the end of the tax year,but only if the taxpayer uses the lower of cost or market inventory method.
E)None of these.

Question

Quizplus · Accepted Answer

The Code permits the taxpayer to estimate inventory shrinkage between the date of the physical inventory and the last day of the tax year.The all-events test is not violated because the test is satisfied when the theft or breakage occurs that is being estimated.

The Multi Department Store Takes Physical Inventories at Each of Its