Coggin Automotive Corporation - Page 17

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          concluded that under either theory, there was an increase in                
          petitioner’s tax liability, payable in four equal annual                    
               Use of LIFO, vis-a-vis FIFO, often allows a taxpayer the               
          benefit of income deferral, particularly in periods of rising               
          inventory costs and stable or growing inventory stock.  The amount          
          of cumulative income deferral obtained through the use of the LIFO          
          method of accounting is represented in a taxpayer’s LIFO reserve.           
               Section 1363(d) mandates recapture of the LIFO reserve upon            
          the conversion of a C corporation to an S corporation. In relevant          
          part, section 1363(d) provides:                                             
                    SEC. 1363(d).  Recapture of LIFO Benefits.--                      
                    (1) In general.–-If–-                                             
                         (A) an S corporation was a C corporation                     
                    for the last taxable year before the first                        
                    taxable year for which the election under                         
                    section 1362(a) was effective, and                                
                         (B) the corporation inventoried goods                        
                    under the LIFO method for such last taxable                       
               the LIFO recapture amount shall be included in the gross               
               income of the corporation for such last taxable year (and              
               appropriate adjustments to the basis  of  the  inventory               
               shall be made to take into account the amount included in              
               gross income under this paragraph).                                    

               4    Pursuant to respondent’s alternative position, the tax            
          deficiency for the 4 taxable years under consideration is                   

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