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Thor Power Tool Company v. Commissioner, 439 U.S. 522 (1979), was a United States Supreme Court case in which the Court upheld IRS regulations limiting how taxpayers could write down inventory.
Thor manufactured equipment using multiple parts that it produced. It capitalized the costs of these parts when produced. When it had inventories of parts in excess of production needs, the company's accounting practice was to write down those inventories, taking a loss based on management judgment.
However, IRS regulations accepted this "lower of cost or market" method for tax purposes only if the taxpayer could demonstrate a reduced market price, or the goods were defective or "subnormal". It did not permit companies to write down goods simply because they were not selling them.In court, the company argued that its deduction for loss should be allowed for tax purposes because it was permitted for accounting purposes. But the Court upheld the IRS regulations, saying, "There is no presumption that an inventory practice conformable to 'generally accepted accounting principles' is valid for tax purposes. Such a presumption is insupportable in light of the statute, this Court's past decisions, and the differing objectives of tax and financial accounting."

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