rom 910 Application To Use LIFO Inventory Method
OMB No. 1545-0042

(Rev. April 1987) > Attach to your tax return. Expires 3-31-90

Department of the Treasury

internal Revenue Service > For Paperwork Reduction Act Notice, see instructions on back.

Name Identifying number (See instructions)

Address (Number, street, city, state and ZIP code) CHECK ONE:

O Initial Election
O Subsequent Election

Statement of Election and Other Information:
A The taxpayer applies to adopt and use the LIFO inventory method provided by section 472. The taxpayer will use this method for the

first time (or modify this method) as of (date tax year ends) _ for the following goods (give details as explained
in instructions; use more sheets if necessary):

B The taxpayer agrees to make any adjustments that the District Director of Internal Revenue may require, on examination of the
taxpayer's return, to reflect income clearly for the years involved in changing to or from the LIFO method or in using it.

1 Nature of business

2a Inventory method used until now

b__Willinventory be taken at actual cost regardless of market value? If “‘No,"’ attachexplanation. . . . . . . (Yes CINo
3a Was the inventory of the specified goods valued at cost as of the beginning of the first tax year to which this
application refers, as required by section 472(d)? If “No,” attach explanation... _.. . OYes ONo
b Will you include in income over 3 tax years any 'y adjustments that resulted from chara to LIFO? If “No,” attach
explanation... _...... . OD Yes ONo

4a List goods subject to inventory that are not to be inventoried under the UFO! method.

b Were the goods of the specified type included in opening inventory counted as acquired at the same time and at a
unit cost equal to the actual cost of the total divided by the number of units on hand? If ‘‘No,"’ attach explanation [] Yes CINo

5a Did you issue credit statements, or reports to shareholders, partners, c other Proprietors, or beneficiaries covering
the first tax year to which this application refers? . . - . . OYes OONo

b___If‘'Yes,"’ state to whom, and on what dates.
c Show the inventory method used in determining income, profit, or loss in those statements.
6a Check method used to figure the cost of the goods in the closing inventory over those in the opening inventory. (See instructions.)

O Most recent purchases O Earliest acquisitions during the year
U1 Average cost of purchases during the year 0 Other—Attach explanation

b The taxpayer selects the month of ______........-------- as the appropriate representative month to be used in selecting the
index or indexes to be used in determining the current-year cost of the taxpayer's inventory pool(s) under regulations section
1.472-8(e)(2)(ii) (see instructions).

7 Method used in valuing LIFO inventories: [J Unit method _Dollar-value method

8a If you use pools, list and describe contents of each pool and, if applicable, the consumer or producer price index or indexes
selected for each pool.
b (1 Asaneligible small business, the taxpayer has elected under section 474 to use the Simplified Dollar-Value LIFO Method.
c ( Asa retailer, wholesaler, jobber, or distributor, the taxpayer selects the pooling method authorized by regulations section
1.472-8(e)(3)(iv).
d Describe briefly the cost system used.
Method used in computing LIFO value of dollar-value pools (see instructions and attach required information):

Double extension method O Published price index (describe)
U1 Other method (describe and justify)
9 Did you change your method of valuing inventories for this tax year with the Commissioner's permission? . . . . . Yes LINo
If “Yes,” attach a copy of the National Office's ‘‘grant letter’ to this Form 970.
10 Were you ever on LIFO before? .. .... . .OYes ONo

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

Under penalties of perjury, | declare that | 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.

Date Signature of officer Title

Form 970 (Rev. 4-87)


Form 970 (Rev. 4-87)

Page 2

General Instructions

(Section references are to the Internal Revenue Code
unless otherwise noted.)

Paperwork Reduction Act Notice.— We ask for this
information to carry out the Internal Revenue laws of the
United States. We need it to ensure that taxpayers are
complying with these laws and to allow us to figure and
collect the right amount of tax. You are required to give us
this information.

Purpose of Form.—Form 970 is an optional form that you
can file with your income tax return to adopt or expand the
LIFO inventory method described in section 472. If you
prefer, you can file a statement that gives the information
asked for on Form 970. (See regulations section 1.472-
3(a).) File the application with your return for the first tax
year for which you intend to use or expand the LIFO
method.

New Simplified Dollnr-Value LIFO Method Available to
Certain Small Businesses (item 8b).—The Tax Reform
Act of 1986 added a new category to the LIFO inventory
method, Simplified Dollar-Value LIFO method. Only small
businesses whose average annual gross receipts for the
three preceding tax years did not exceed $5,000,000 may
elect to use this 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. The new 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. The 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. The Simplified Dollar-
value LIFO method applies for tax years beginning after
1986.

Protective Election.—A protective election in connection
with section 95 of the Tax Reform Act of 1984 (P.L. 98-
369) may be made by completing and filing Form 970 as
specified in temporary regulations section 5h.4(g). Write
“Protective Election Under Regulations 5h.4(g)” at the top
of the Form 970 you file to make this election. This election
must be made for your first tax year beginning after July
18, 1984.

Change from LIFO Method.—Once you adopt the LIFO
method, it is irrevocable unless the Commissioner allows
you to change to another method.

Specific Instructions

Identifying Number.—An individual's identifying number
is the social security number. For all others it is the
employer identification number.

Initial Election or Subsequent Election. —If this is your
first election to use the LIFO method, check the box for
Initial Election. tf you are expanding a prior LIFO election,
check the box for Subsequent Election.

Statement of Election and Other Information.—If this is
an initial election, enter the tax year you will first use the
LIFO method and specify the goods to which you will apply
it. If this is a subsequent election, enter the tax year you will
expand the LIFO method and specify the goods to which
the LIFO method is being expanded.

Attach a detailed analysis of all your inventories as of the
beginning and end of the first tax year for which you will use
the LIFO method (tax year for which the LIFO method is
being expanded if this is a subsequent election) and as of
the beginning of the preceding tax year. Also, include the
ending inventory reported on your return for the preceding
tax year. Regulations sections 1.472-2 and 1.472-3 give
more information about preparing this analysis.

Item 6a.—See regulations sections 1.472-2 and
1.472-8(e) for more information.

Item 6b.—See regulations section
1.472-8(e)(3)(iii)(C) before completing item 6b.

Item 8a.—To adopt and use the inventory price index
computation method provided by regulations section
1.472-8(e)(3), you must enter in item 8a a list of each
inventory pool, the type of goods included in each pool, and
the consumer or producer price index or indexes selected
for each inventory pool. If more space is needed, attach a
schedule showing the information.

Item 8b.—Check item 8b if you have made the section

474 election to use the Simplified Dollar-Value LIFO.
method. See section 474 for additional details.

Item 8c.—Check item 8c to select the pooling method
authorized by regulations section 1.472-8(e)(3)(iv). See the
regulations for additional details.

Item 8e.—You may use the ‘‘dollar-value’”’ LIFO method to
determine the cost of your LIFO inventories as long as you
use it consistently and it clearly reflects income.
Regulations section 1.472-8 gives details about this
method.

If you are a wholesaler, retailer, jobber, or distributor,
see regulations section 1.472-8(c) for guidelines on
establishing dollar-value LIFO pools.

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 ‘‘index’’ method,
attach a detailed statement to explain the method you do
use and how it is justified under regulations section 1.472-
8(e)(1). For example, if you use a ‘‘link-chain’’ method,
your statement should explain why the nature of the pool
makes the other two methods impractical or unsuitable.

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.

U.S. Government Printing Office: 1987—201-992/60074