Inventory May Be Valued on the Tax Return at the Lower

question 55

Multiple Choice

Inventory may be valued on the tax return at the lower of cost or market unless

• A)replacement cost is higher than historical cost.
• B)the taxpayer determines inventory cost using the LIFO method.
• C)the taxpayer determines inventory cost using the FIFO method.
• D)the cash method of accounting is used by the taxpayer.

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Definitions:

Tracking Error

The difference between the return on a managed portfolio and that of a benchmark portfolio against which the manager is evaluated.

Benchmark Return

The standard against which the performance of a security, mutual fund, or investment manager can be measured.

Passive Portfolio

An investment strategy that seeks to replicate and hold a market index or benchmarks, typically requiring less frequent trading and lower fees.

Market Timing

Asset allocation in which the investment in the market is increased if one forecasts that the market will outperform T-bills.