Some of the inventory methods allowed for tax purposes are described in Treas. Normally, the election to use LIFO must be made on the original return or on an amended return filed by the due date of the original return. This applies to foreign as well as domestic entities in the combined report. In cases where foreign corporations are combined for the first time at audit however, the taxpayer will be allowed to retroactively elect to use LIFO for valuation of the foreign corporation's inventory starting with the first year of combination. Example Audit combined the taxpayer on a worldwide basis for 1980 - 1989.
All years are in litigation, appeals or protest.
In 1996, the taxpayer now agrees that they are unitary on a worldwide basis. The taxpayer will be allowed to elect to use LIFO for inventory valuation starting in 1980. Example Assume the facts as in Example 1, except the taxpayer was previously audited for 1977 - 1979, and did not dispute the worldwide combination for those years. The years were closed without the use of LIFO inventory valuation. The taxpayer cannot use the LIFO method on a retroactive basis for any year.