Coggin Automotive Corporation - Page 24

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          method of accounting because a taxpayer that experienced rising             
          acquisition costs would seldom, if ever, experience a decrement of          
          its LIFO reserves.7   Congress thus recognized that the deferred            
          built-in gain resulting from using the LIFO method might escape             
          taxation at the corporate level.  In light of this potential for            
          abuse, section 1363(d) was enacted.  See H. Rept. 100-391 (Vol.             
          II), at 1098 (1987).                                                        
               After considering the legislative histories of sections 1374           
          and  1363(d), we conclude that the application of the aggregate             
          approach (as opposed to the entity approach) of partnerships in             
          this case better serves Congress’ intent.  By enacting sections             
          1374 and 1363(d), Congress evinced an intent to prevent                     
          corporations from avoiding a second level of taxation on built-in           
          gain assets by converting to S corporations.  Application of the            
          aggregate approach to section 1363(d) is consistent with Congress’          
          rationale for enacting this section and operates to prevent a               
          corporate taxpayer from using the LIFO method of accounting to              
          permanently avoid gain recognition on appreciated assets.  In               
          contrast, applying the entity approach to section 1363(d) would             
          potentially allow a corporate partner to permanently avoid paying           
          a second level of tax on appreciated property by encouraging                

               7    See, e.g., Staff of Joint Committee on Taxation,                  
          Description of Possible Options to Increase Revenues 189 (J.                
          Comm. Print 1987) (“[section 1374] may be ineffective in the case           
          of a LIFO inventory, since a taxpayer experiencing constant                 
          growth may never be required to invade LIFO inventory layers”).             

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