Fillable Form 970 - Application To Use Lifo Inventory Method (Page 3 of 4) in pdf

Page

Form 970 (Rev. 11-2012)

General Instructions

Specific Instructions

Section references are to the Internal Revenue Code unless

Name and Identification Number

otherwise noted.

Enter the name of the filer on the first line of page 1 of Form

Future Developments

970. In general, the filer of the Form 970 is the applicant.

However, if Form 970 is filed on behalf of the applicant, enter

For the latest information about developments related to Form

the filer’s name and identification number on the first line of

970 and its instructions, such as legislation enacted after they

Form 970 and enter the applicant’s name and identification

were published, go to

number on the second line. An individual’s identifying number is

Purpose of Form

his or her social security number. For all others, it is the entity’s

employer identification number.

Form 970 is filed with your income tax return to elect to use the

last-in, first-out (LIFO) inventory method described in section

Part I—Statement of Election under Section

472. If you prefer, you can file an election statement that gives

472

the same information requested on Form 970.

Line 1. Enter the tax year the LIFO inventory method will first

How To Use Form 970

be used and list the inventory items for which you will use this

You must complete Parts I, II, and VI. In addition, complete

method. Include only inventory items that are not already

Parts III, IV, and V, as applicable.

covered under a previous LIFO election. Attach a detailed

analysis of all of your inventories as of the beginning and end of

When To File

the first tax year the LIFO method will be used and the

File Form 970 (or a similar statement) with your tax return for

beginning inventory of the preceding tax year. Also, include the

the first tax year you intend to use the LIFO method.

ending inventory reported on your tax return for the preceding

If you filed your return for the tax year in which you wish to

tax year. See Regulations sections 1.472-2 and 1.472-3 for

use the LIFO inventory method described in section 472

more details on preparing this analysis.

without making the election, you can make the election by filing

Part III—Specific Goods (Unit) Method

an amended return within 12 months of the date you filed your

Line 12. See Regulations section 1.472-2 for more information.

original return. Attach Form 970 (or similar statement) to the

amended return and write “Filed pursuant to section

Part IV—Dollar-Value Method

301.9100-2” at the top of Form 970. File the amended return at

Line 15. Provide sufficient information to justify the pooling

the same address the original return was filed.

method you are using. Retailers, wholesalers, jobbers, and

Change From LIFO Method

distributors are required to pool their goods by major lines,

types, or classes, as authorized under Regulations section

Once you adopt the LIFO method, it is irrevocable unless the

1.472-8(c). Manufacturers or processors can use the natural

IRS allows you to change to another method. To request

approval to change from the LIFO inventory method, you can

business unit pooling method, as authorized by Regulations

use the automatic change request procedures or the advance

section 1.472-8(b)(1), or can establish multiple pools of similar

items in lieu of natural business unit pools, under Regulations

consent request procedures. For details about these two

section 1.472-8(b)(3)(i). Multiple pools include raw materials

procedures under which an applicant can request a change in

content pools authorized by Regulations section

accounting method, see Purpose of Form under General

Instructions in the Instructions for Form 3115, Application for

1.472-8(b)(3)(ii).

Change in Accounting Method. For more information, also see

Eligible small businesses can establish pools under the

the List of Automatic Accounting Method Changes in the

simplified dollar-value LIFO method (discussed below).

Instructions for Form 3115.

Manufacturers or processors using the inventory price index

LIFO Recapture Amount

computation (IPIC) method can establish pools based on the 2-

digit commodity codes in Table 6 of the Producer Price Index

A C corporation must include in gross income a LIFO recapture

(PPI) Detailed Report. A retailer using the IPIC method can

amount (defined below) if it:

establish pools based on either the general expenditure

1. Used the LIFO method for its last tax year before the first

categories in Table 3 of the Consumer Price Index (CPI) Detailed

tax year for which an election to be taxed as an S corporation

Report or on the 2-digit commodity codes in Table 6 of the PPI

becomes effective, or

Detailed Report. A wholesaler, jobber, or distributor using the

2. Transferred LIFO inventory assets to an S corporation in a

IPIC method can establish pools based on the 2-digit

nonrecognition transaction in which those assets constitute

commodity codes in Table 6 of the PPI Detailed Report. The PPI

transferred basis property.

and CPI Detailed Reports are published monthly by the U.S.

Bureau of Labor Statistics (BLS). Under the IPIC method, you

The LIFO recapture amount is the amount by which the C

can also combine pools under special 5% rules. See

corporation’s inventory amount of the inventory assets using the

Regulations sections 1.472-8(b)(4) and 1.472-8(c)(2) for more

first-in, first-out (FIFO) method exceeds the inventory amount of

information.

such assets under the LIFO method at the close of the C

corporation’s last tax year as a C corporation (or for the year of

Describe any other method of pooling used.

the transfer, if 2, above, applies).

Simplified dollar-value LIFO method. If your average

For additional information on LIFO recapture, see

annual gross receipts for the 3 preceding tax years did not

Regulations section 1.1363-2 and Rev. Proc. 94-61, 1994-2

exceed $5 million, you can elect to use the simplified dollar-

C.B. 775. Also see the Instructions for Form 1120 and the

value LIFO method. If the taxpayer is a member of a controlled

Instructions for Form 1120S.

group, the gross receipts of the group are used to determine if

the taxpayer qualifies. This method requires that the taxpayer

Form 970 - Application To Use Lifo Inventory Method Page 3

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