[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.471-5]

[Page 500]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.471-5  Inventories by dealers in securities.

    A dealer in securities who in his books of account regularly 
inventories unsold securities on hand either--
    (a) At cost,
    (b) At cost or market, whichever is lower, or
    (c) At market value,

may make his return upon the basis upon which his accounts are kept, 
provided that a description of the method employed is included in or 
attached to the return, that all the securities are inventoried by the 
same method, and that such method is adhered to in subsequent years, 
unless another method is authorized by the Commissioner pursuant to a 
written application therefor filed as provided in paragraph (e) of Sec. 
1.446-1. A dealer in securities in whose books of account separate 
computations of the gain or loss from the sale of the various lots of 
securities sold are made on the basis of the cost of each lot shall be 
regarded, for the purposes of this section, as regularly inventorying 
his securities at cost. For the purposes of this section, a dealer in 
securities is a merchant of securities, whether an individual, 
partnership, or corporation, with an established place of business, 
regularly engaged in the purchase of securities and their resale to 
customers; that is, one who as a merchant buys securities and sells them 
to customers with a view to the gains and profits that may be derived 
therefrom. If such business is simply a branch of the activities carried 
on by such person, the securities inventoried as provided in this 
section may include only those held for purposes of resale and not for 
investment. Taxpayers who buy and sell or hold securities for investment 
or speculation, irrespective of whether such buying or selling 
constitutes the carrying on of a trade or business, and officers of 
corporations and members of partnerships who in their individual 
capacities buy and sell securities, are not dealers in securities within 
the meaning of this section. See Sec. Sec. 1.263A-1 and 1.263A-3 for 
rules regarding the treatment of costs with respect to property acquired 
for resale.

[T.D. 6500, 25 FR 11725, Nov. 26, 1960, as amended by T.D. 8131, 52 FR 
10084, Mar 30, 1987; T.D. 8482, 58 FR 42234, Aug. 9, 1993]

[[Page 501]]