A manufacturer of pollution control facilities reported its profits on the completed-contract method. To value its raw materials and work in process, the taxpayer used the LIFO method, thus

“having it both ways” (i.e., deferring profits and maximizing the cost of goods sold).

The IRS claimed that the two methods are mutually exclusive and that the costs of materials, labor, supplies, etc. are to be treated as deferred expenditures, deductible only when the contracts are completed. Is the IRS correct? (See Peninsular Steel Products

& Equipment Co., Inc., 78 TC 1029, Dec.

39,113 (1982).)