Rev. Rul. 58-208

Advice has been requested concerning the determination of the original entry date for distilled spirits mingled or consolidated in storage tanks in an internal revenue bonded warehouse and the application of the first-in, first-out principle to spirits withdrawn from such storage tanks.

Section 225.417a-1 of the Regulations relating to the Warehousing of Distilled Spirits provides that packages of spirits meeting definite requirements specified therein may be dumped and consolidated in a warehouse storage tank. Section 225.417c of the regulations provides that the warehouse proprietor will make application for such consolidation of spirits, to the storekeeper-gauger, on Form 2323, Consolidation of Packaged Distilled Spirits.

Section 225.417f-1 of the regulations permits the transferring of such consolidated spirits from one tank to another, i.e. , further consolidation of the distilled spirts, if the spirts to be added to a tank are homogeneous with the consolidated spirits already in the tank. It further provides that each lot of consolidated spirits deposited in a storage tank shall retain its date of original entry and that withdrawals from a storage tank containing more than one lot of consolidated spirits shall be accounted for by lot on a first-in, first-out basis.

The determination of the original entry date here involved relates to storage tanks containing more than one lot of consolidated spirits. The application of the procedure whereby each lot of spirits so combined will retain its own entry date has, at times, complicated the keeping of warehouse records and the preparation of Form 1520 covering the transfer of consolidated spirits between tanks.

It is held that, since spirits proviously consolidated from packages are eligible to be combined in a storage tank only if they could originally have been consolidated as a single lot, the proprietor may be permitted to make application on Form 2323 and prepare Form 1520 for consolidated spirits combined in a tank in the same manner as provided for in the case of the original consolidation of spirits in packages. If this procedure is elected, the entire contents of the tank will acquire the entry date of the oldest package. This holding does not apply to bulk neutral spirits mingled in tanks since, unlike spirits being consolidated from packages, they may be mixed without regard to the date of original entry.

The first-in first-out principle expressed in sections 225.412, 225.417f-1, and 225.424 of the regulations is construed to mean that the first spirits deposited in bond shall be deemed to be the first spirits withdrawn in the case of withdrawals from a storage tank containing spirits of more than one entry date.