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there is an increment in inventory. See id. The LIFO value of
such increment is then computed, see id., and the increment is
added to beginning inventory for the pool to determine the
current year’s LIFO ending inventory for the pool, see id.; see
also Fox Chevrolet, Inc. v. Commissioner, 76 T.C. at 733 n.16.
If ending inventory valued at base-year cost is less than
beginning inventory at base-year cost, there is a decrement in
inventory. See sec. 1.472-8(e)(2)(iv), Income Tax Regs. When
there is decrement, the current year’s LIFO ending inventory is
the beginning inventory reduced by the decrement. See id.
Once the total LIFO ending inventory is calculated, the
ending inventory figure is subtracted from the sum of the values
for beginning inventory and purchases during the year to produce
the COGS for the current year. Fox Chevrolet, Inc. v.
Commissioner, supra at 722.
B. Unauthorized Change in Method of Accounting
Respondent determined that Investments made an unauthorized
change in method of accounting when it changed the definition of
its inventory units for its new car pool from model code10 to
10 The parties have stipulated that vehicle "model code" is
synonymous with vehicle "body style". For the remainder of the
opinion, we will use model code to refer to both model code and
body style. Furthermore, the parties have stipulated that a
vehicle model code is a code given to each vehicle by the
manufacturer that differentiates the different body
configurations and interior styling packages of vehicles within
each model line (e.g., a two-door sports model, a four-door sedan
with standard interior, etc.).
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