Form 970 Application To Use LIFO Inventory Method (Rev. December 1995) OMB No. 1545-0042

© 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 (see instructions)

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 (describe) 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.

Applicant’s signature and date Parent officer’s signature (if applicable) and date

Cat. No. 17057T Form 970 (Rev. 12-95)

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? If “No,” attach an explanation.

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

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 an explanation

b

Name and title (print or type) Name and title (print or type)
Form 970 (Rev. 12-95) 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 9 hr., 20 min.

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

more information.

Learning about the law or the form 2 hr., 17 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, 1989-1 C.B. 168.

Preparing and sending the form to the IRS 2 hr., 32 min.

If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would

be happy to hear from you. See the instructions for 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 a form that you file with your

income tax return to adopt or expand the last-in, first-out (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 Form 970

(or a similar statement) with your tax return for the first tax year

you intend to use or expand the LIFO method.

Line 8.—Please provide sufficient information to justify the

pooling method. If you select indexes from the CPI Detailed

Report, you may establish inventory pools for any group of

goods included within each of the general categories of

producer goods described in Table 3 of the CPI Detailed Report.

Likewise, if you select indexes from the Producer Price Indexes,

you may establish inventory pools for any group of goods,

included within each of the general categories of producer

goods described in Table 6 of the Producer Price Indexes. See

Rev. Proc. 84-57, 1984-2 C.B. 496.

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.

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)(2). If you use a published price index method, indicate

the specific consumer or producer price index(es) selected for

each inventory pool. Generally, you must use 80% of the change

in price indexes, unless you are an eligible small business, as

defined in section 474(c). Provide a detailed description of the

LIFO computation method you will use. If you use the link-chain,

index, or “other” method, attach a detailed statement explaining

how the method is justified under Regulations section

1.472-8(e)(1). In addition, if you should use a link-chain method,

your statement should explain why the nature of the pool makes

the double-extension or index method 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 by or on behalf of the

taxpayer electing the LIFO inventory method by an individual

with the authority to bind the taxpayer in such matters. If the

taxpayer is a member of a consolidated group, Form 970 must

also be signed by a duly authorized officer of the common

parent. See Regulations section 1.1502-77.

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 Indexes or the CPI Detailed Report

published by the U.S. Department of Labor, 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.

Printed on recycled paper

LIFO Recapture Amount.—A C corporation must include in

gross income the LIFO recapture amount (defined below) if:

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

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

becomes effective, or

2. It transferred LIFO inventory assets to an S corporation in a

nonrecognition transaction (within the meaning of section

7701(a)(45) in which transferred assets constitute transferred

basis property (within the meaning of section 7701(a)(43)).

For additional information on the LIFO recapture, see

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

The LIFO recapture amount is the amount by which the C

corporation’s inventory under the FIFO method (determined by

using cost or market, whichever is lower) authorized by section

471 exceeds the inventory amount under the LIFO method at the

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

for the year of the transfer, if “2” above applies).

775. Also see the instructions for Forms 1120 and 1120-A and

the instructions for Form 1120S.