of Units

Purchased During Year

% of Total Units

Purchased During Year

During Year During Year Price

Core Supplier A 2 25% $20 Core Supplier B 6 75% $16

Total 8

CAV Core Supplier Price for Part X Customer Cores = (25% x $20) + (75% x 16) = $17.

.04 Comparison of Cost and Market. Under the CAV method, the market value of each core in ending inventory, as determined under section 4.03 of this revenue procedure, shall be compared with the cost of each core in ending inventory, as determined under section 4.02 of this revenue procedure, and the lower of such values shall be the inventory value of the core. This analysis must be performed on a partby-part basis.

.05 Write-down of Defective Cores . Under the CAV method, a taxpayer may not reduce the value of a defective core under § 1.471–2(c) until the taxpayer discovers that the core is subnormal and scraps the core or offers the core for sale at a bona fide selling price that is less than cost. In no case may a taxpayer value a core at less than the scrap value. A taxpayer may not reduce the value of cores based on anticipated defect percentages or historical defect experience rates. If a taxpayer complies with the requirements of this revenue procedure, the Service will not disallow a write-down of a defective core in the year it is scrapped on the grounds that the decline in the value of the core actually occurred in a preceding taxable year.