Form 970 Application To Use LIFO Inventory Method OMB No. 1545-0042

Expires 10-31-95

(Rev. November 1992) © Attach to your tax return.

Department of the Treasury

Internal Revenue Service © For Paperwork Reduction Act Notice, see instructions on back.

Name Identifying number (See instructions)

Number, street, and room or suite no. (If a P.O. box, see instructions.) CHECK ONE:

First Election

Subsequent Election

A

B

1

2

Yes No

3

4a

5a

b

c

6a Check method used to figure the cost of the goods in the closing inventory over those in the opening inventory. (See instructions.)

Most recent purchases Earliest acquisitions during the year

Average cost of purchases during the year Other—Attach explanation

The taxpayer selects the month of as the representative month used in selecting

the index or indexes used to determine the current-year cost of the taxpayer’s inventory pool(s) under Regulations section

1.472-8(e)(2)(ii) (see instructions). This applies only to taxpayers using the Inventory Price Index Computation Method.

6b

7 Method used in valuing LIFO inventories: Unit method Dollar-value method

8 If you use pools, check the box that indicates the pooling method. List and describe the contents of each pool in an attached statement.

By line, type, or class of goods authorized by Regulations section 1.472-8(c) (retailer, wholesaler, jobber, or distributor)

Pooling method authorized by Regulations section 1.472-8(e)(3)(iv) (retailer, wholesaler, jobber, or distributor)

Natural business unit authorized by Regulations section 1.472-8(b)(1) (manufacturer or processor)

Multiple pools authorized by Regulations section 1.472-8(b)(3)(i) (manufacturer or processor)

Raw material-content authorized by Regulations section 1.472-8(b)(3)(ii) (manufacturer or processor)

Simplified Dollar-Value Method under section 474 (see instructions)

Other (describe and justify)

9 Method used in computing LIFO value of dollar-value pools (see instructions and attach required information)

Double-extension Published Price Index (describe) Index (describe and justify)

Link-chain (describe and justify) Other method (describe and justify)

10 Attach a statement briefly describing the cost system used

11 Did you receive the Commissioner’s permission to change your method of valuing inventories for this tax year? Yes No

If “Yes,” attach a copy of the National Office’s “grant letter”.

12 Did you ever use the LIFO inventory method before? Yes No

If “Yes,” attach a statement listing the tax years you used LIFO and explain why you discontinued it.

Under penalties of perjury, I declare that I have examined this application, including any accompanying schedules and statements, and to the best of my knowledge

and belief, it is true, correct, and complete.

Signature Title, if any Date

Form 970 (Rev. 11-92)Cat. No. 17057T

Part I

Part II

Statement of Election

The taxpayer elects to adopt and use the LIFO inventory method provided by section 472. The taxpayer will use

(or expand) the LIFO inventory method for the first tax year ending (month, day, year) ©

for the following goods (see instructions):

Will inventory be taken at actual cost regardless of market value? If “No,” attach an explanation

Other Information

Nature of business ©

Inventory method used until now ©

Will any adjustment that resulted from the change to the LIFO method be included in income over a 3-year period?

List goods subject to inventory that will not be inventoried under the LIFO method ©

Did you issue credit statements or reports to shareholders, partners, other proprietors, or beneficiaries covering

the first tax year to which this application relates?

If “Yes,” state to whom and on what dates ©

Show the inventory method used to determine income, profit, or loss in those statements ©

C

D

The taxpayer agrees as required by Regulations section 1.472-4, to make any adjustments that the District

Director of Internal Revenue may require, on the examination of the taxpayer’s income tax return, to clearly

reflect income for the years involved in the change to or from the LIFO inventory method or due to the use of

the LIFO inventory method.

Was the beginning inventory for the items specified in Item A above, valued at cost (as required by section

472(d)) for the first tax year this application applies? If “No,” attach an explanation

If “No,” attach an explanation

City or town, state, and ZIP code

Were the goods specified in Item A, above, treated as acquired at the same time and at a unit cost equal to the

actual cost of the total divided by the number of goods on hand? If “No,” attach explanation

b
Form 970 (Rev. 11-92) Page 2

Part I.—Statement of Election

General Instructions

Section references are to the Internal Revenue Code unless

otherwise noted.

Paperwork Reduction Act Notice.—We ask for the

information on this form to carry out the Internal Revenue

laws of the United States. You are required to give us the

information. We need it to ensure that you are complying

with these laws and to allow us to figure and collect the right

amount of tax.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

average time is:

Recordkeeping 8 hr., 37 min.

Line 6a.—See Regulations sections 1.472-2 and 1.472-8(e)

for more information.

Learning about the law or the form 1 hr., 35 min.

Line 6b.—See Regulations section 1.472-8(e)(3)(iii)(C) before

completing line 6b. If you do not use the Retail Inventory

Method, also see Rev. Rul. 89-29, 89-1 C.B. 168.

Preparing and sending the form to the IRS 1 hr., 48 min.

If you have comments concerning the accuracy of these

time estimates or suggestions for making this form more

simple, we would be happy to hear from you. You can write

to both the Internal Revenue Service and the Office of

Management and Budget at the addresses listed in the

instructions of the tax return with which this form is filed.

Line 7.—You may use the “dollar-value” LIFO method to

determine the cost of LIFO inventories as long as you use it

consistently and it clearly reflects income. Regulations

section 1.472-8 gives details about this method.

Purpose of Form.—Form 970 is an optional form that you

may file with your income tax return to adopt or expand the

LIFO inventory method described in section 472. If you

prefer, you may file a statement that gives the same

information asked for on Form 970. (See Regulations section

1.472-3(a).) File the application with your tax return for the

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

Line 8.—Indicate the number of pools and the type of goods

included in each pool in an attached statement.

To adopt and use the inventory price index computation

method provided by Regulations section 1.472-8(e)(3)(iv), you

must list each inventory pool, indicate the type of goods

included in each pool, and indicate the consumer or

producer price index or indexes selected for each inventory

pool.

Simplified Dollar-Value LIFO Method Under Section 474

(Line 8).—Only small businesses whose average annual

gross receipts for the 3 preceding tax years did not exceed

$5 million may elect to use the Simplified Dollar-Value LIFO

method. If the taxpayer is a member of a controlled group,

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

taxpayer qualifies. This method requires that the taxpayer

maintain a separate inventory pool for items in each major

category in the applicable Government price index, and that

the taxpayer make adjustments to each separate pool based

on changes from the preceding tax year in the component of

such index for the major category. A qualified taxpayer does

not need the consent of the Secretary to elect these

provisions. The election is in effect for the first year the

election is made and for each succeeding year the taxpayer

qualifies as an eligible small business. The election may be

revoked only with the consent of the Secretary.

If you have made the section 474 election to use the

Simplified Dollar-Value LIFO method, see section 474 for

additional details.

If you are a wholesaler, retailer, jobber, or distributor, see

Regulations section 1.472-8(e) for guidelines on establishing

dollar-value LIFO pools.

Line 9.—Select a LIFO computation method for the

dollar-value pooling. This is not applicable to taxpayers using

the specific goods (unit) method. To figure the LIFO value of

a dollar-value pool, use a method described in Regulations

section 1.472-8(e). If you do not use the “double-extension”

or “published price index” method, attach a detailed

statement to explain the method used and how it is justified

under Regulations section 1.472-8(e)(1). For example, if you

should use a “link-chain” method, your statement should

explain why the nature of the pool makes the other two

methods impractical or unsuitable. Change From LIFO Method.—Once you adopt the LIFO

method, it is irrevocable unless the Secretary allows you to

change to another method. Signature.—Form 970 must be signed. If you are filing for a

corporation, the form must be signed by the president, vice

president, treasurer, assistant treasurer, chief accounting

officer, or other corporate officer (such as tax officer)

authorized to sign.

Specific Instructions

First Election or Subsequent Election.—If this is your first

election to use the LIFO method, check the box for First

Election. If you are expanding a prior LIFO election, check

the box for Subsequent Election.

The simplified dollar-value method requires that general

categories of inventory pools be established. The general

categories are based on categories of inventory items

contained in the Producer Price Index and Consumer Price

Index published by the Bureau of Labor Statistics. See

section 474 and Regulations section 1.472-8 for more

details.

Part II.—Other Information

Item A.—Enter the tax year the LIFO inventory method will

first be used (or expanded) and list the inventory items for

which you will use this method. If this is a subsequent

election, list the inventory items for which you will use this

method but only for those items that are not covered under a

previous LIFO election.

Attach a detailed analysis of all of your inventories as of

the beginning and end of the first tax year the LIFO method

will be used (or expanded) and the beginning inventory of the

preceding tax year. Also, include the ending inventory

reported on your tax return for the preceding tax year. See

Regulations sections 1.472-2 and 1.472-3 for more details on

preparing this analysis.

Identifying Number.—An individual’s identifying number is

the social security number. For all others, it is the employer

identification number.

Address.—Include the suite, room or other unit number after

the street address. If the Post Office does not deliver mail to

the street address and you have a P.O. box, show the box

number instead of the street address.