[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.162-3]

[Page 776]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.162-3  Cost of materials.

    Taxpayers carrying materials and supplies on hand should include in 
expenses the charges for materials and supplies only in the amount that 
they are actually consumed and used in operation during the taxable year 
for which the return is made, provided that the costs of such materials 
and supplies have not been deducted in determining the net income or 
loss or taxable income for any previous year. If a taxpayer carries 
incidental materials or supplies on hand for which no record of 
consumption is kept or of which physical inventories at the beginning 
and end of the year are not taken, it will be permissible for the 
taxpayer to include in his expenses and to deduct from gross income the 
total cost of such supplies and materials as were purchased during the 
taxable year for which the return is made, provided the taxable income 
is clearly reflected by this method.