1736 " Cost ." "Selling price ." Determination of costs, selling prices, etc . Use of con ve rsi on f acto rs in co mput ing quantity of taxab le commodity . Purch ase or sale otherwise than through ar m's-leng th transac- tion . Reb utt al of presump- tion of tax shifting. Proof. 14TH C ONGRESS . SESS. II. CH. 690. JUNE 22, 1936. period shall, when necessary for a fair comparison, be deemed to be the average margin, as determined by the Commissioner, of representative concerns engaged in a similar business and similarly circumstanced . (2) The term "cost" means, in the case of articles manufactured or produced by the taxpayer, the cost to the taxpayer of materials entering into the articles ; or, in the case of articles purchased by the taxpayer for resale, the price paid by him for such articles (reduced in both cases by the amount for which he is reimbursed by his vendor) . (3) The term "selling price" means selling price minus (A) amounts subsequently paid or credited to the purchaser on or before June 1, 1936, or thereafter in the bona fide settlement of a written agreement entered into on or before March 3, 1936, as reimbursement for the amount included in such price on account of a Federal excise tax ; and minus (B) the allocable portion of any professional fees and expenses of litigation incurred in secur- ing the refund or preventing the collection of the Federal excise tax, not to exceed 10 per centum of the amount of such tax . (g) In determining costs, selling prices, and net income, the tax- payer shall, unless otherwise shown, be deemed to have sold articles in the order in which they were manufactured, produced, or acquired . Where the taxpayer's records do not adequately establish the quan- tity of a commodity taxable under the Agricultural Adjustment Act, as amended, entering into articles sold by him, such quantities shall be computed by the use of the conversion factors prescribed in regu- lations under such Act, as amended . (h) If the taxpayer made any purchase or sale otherwise than through an arm's-length transaction, and at a price other than the fair market price, the Commissioner may determine the purchase or sale price to be that for which such purchases or sales were at that time made in the ordinary course of trade . (i) Eithe r the taxpa yer or the Commis sione r may rebut the p re- sumption established by subsection (e) by proof of the actual extent to which the taxpayer shifted to others the burden of the Federal excise tax . Such proof may include, but shall not be limited to (1) Proof that the change or lack of change in the margin was due to changes in factors other than the tax . Such factors shall include any clearly shown cha nge (A) in the type or grade of article or materials, or (B) in costs of production . If the taxpayer asserts that the burden of the tax was borne by him while the burden of any other increased cost was shifted to others, the Commissioner shall determine, from the respective effective dates of the tax and of t he other increase in cost as compared with the date of the change in margin, and from the general experience of the industry, whether the tax or the increase in other cost was shifted to others . If the Commissioner deter- mines that the change in margin was due in part to the tax and in part t o the incr ease in ot her cost, he shall a pportion t he change in margin between them . (2) Proof that the taxpayer modified contracts of sale, or adopted a new contract of sale, to reflect the initiation, termina- tion, or change in amount of the Federal excise tax, or at any such time changed the sale price of the article (including the effect of a change in size, package, discount terms, or any other merchandising practice) by substantially the amount of the tax or change therein, or at any time billed the tax as a separate item to any vendee or indicated by any writing that the sale
