- 21 -
elected in the Form 970 to use the most recent purchases method,
and not any other proper method, in determining the current-year
cost of its parts pool.6
In inventorying goods with respect to which a taxpayer
elected the LIFO method, the taxpayer is required to (1) treat
those goods remaining on hand at the end of the taxable year as
being (a) those included in the opening inventory of the taxable
year, in the order of acquisition and to the extent thereof, and
(b) those acquired during the taxable year, sec. 472(b)(1); sec.
1.472-1(a), Income Tax Regs.; and (2) inventory them at cost,
sec. 472(b)(2); sec. 1.472-2(b), Income Tax Regs.
There are two basic LIFO computational systems. One is
based on specific goods (specific-goods LIFO method). See sec.
1.472-2, Income Tax Regs. The other is based on the dollars
invested in inventory and is known as the dollar-value LIFO
method. See sec. 1.472-8, Income Tax Regs. Under the specific-
goods LIFO method, quantitative changes in inventory during the
year are measured in terms of an appropriate unit, such as
pounds, pieces, or gallons. The dollar-value LIFO method deter-
mines increases or deceases in inventory in terms of total
6 The parties and their respective experts also disagree
about whether Mountain State Ford's method of using replacement
cost under the LIFO method complies with generally accepted
accounting principles (GAAP) and conforms as nearly as may be to
the best accounting practice in Mountain State Ford's trade or
business, as required by sec. 471 and the regulations thereunder.
However, our resolution of the disagreement between the parties
about the clear-reflection-of-income standard makes it
unnecessary for us to address the parties' and their respective
experts' dispute over GAAP.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011