rom 970 Application To Use LIFO Inventory Method

OMB No. 1545-0042

(Rev. April 1990) > Attach to your tax return.
Department of the Treasury ach fo your t " ; Expires 2-28-93
Internal Revenue Service DP _For Paperwork Reduction Act Notice, see instructions on back.
Name Identifying number (See instructions)
Address (Number, street, (or P.O. box number if mail is not delivered to street address) city, state and ZIP code) CHECK ONE

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_Will inventory be taken at actual cost regardless of market value? If ‘‘No,” attach explanation _.... .. DYes [INo
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,” attachexplanation . . . . _.. . OYes [No
b Will you include in income over 3 tax years any adjustments that resulted from changing to LIFO? If “No,” attach
explanation. : 2... Yes ONo

4a List goods subject to inventory that are not to be inventoried under ti the IFO 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 Dyes [No
5a_ Did you issue credit statements, or reports to shareholders, partners, other proprietors, or beneficiaries covering the
first tax year to which this application refers? . . . . Coe . OYes CINo
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.)

OD Most recent purchases 1 Earliest acquisitions during the year
1 _ Average cost of purchases during the year O_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). (This applies only to taxpayers using the Inventory Price Index Computation Method.)

7__ Method used in valuing LIFO inventories: (1 Unit method 1 _Dollar-value method

8 If you use pools, indicate pooling method below. List and describe the contents of each pool.

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)

onoooo0o0go

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

Oo Double-extension Published Price Index (describe) 0 Index (describe and justify)
O_Link-chain (describe and justify) (Other method (describe and justify)

10 Briefly describe in an attached statement the cost system used

11 Did you change your method of valuing inventories for this tax year with the Commissioner's permission? . OYes CNo
If "Yes," attach a copy of the National Office's ‘'grant letter” to this Form 970.

12 Were you ever on LIFO before? .OYes CINo
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,
itis true, correct, and complete

Signature of officer Title Bate

Form 970 (Rev. 4-90)


Form 970 (Rev. 4-90)

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.

The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
average time is:

Recordkeeping 8hrs. 22 min.
Learning about the law or the form. . Lhr.12 min.
Preparing and sending the form to

IRS 2 . Lhr. 23 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.
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.

Simplified Dollar-Value LIFO Method Under Section 474
(item 8).—Only small businesses whose average annual
gross receipts for the three preceding tax years did not
exceed $5,000,000 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 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. 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.

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. If 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. Taxpayers that do not use the
Retail Inventory Method, also see Rev. Rul. 89-29, 89-1
C.B. 168.

Item 7.—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 you details about this method

Item 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. If more space is needed, attach a schedule showing
the information.

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.

Item 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 “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.

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.