Vanderbilt Law Review


Mark F. Dalton

First Page



LIFO is a special statutory election available to taxpayers in lieu of the normal methods by which inventory identification and valuation is accomplished under section 471 of the Internal Revenue Code of 1954. The applicable Code section, section 472, and the regulations thereunder are highly technical provisions containing many pitfalls for the unsuspecting. Furthermore, a LIFO election for tax purposes affects a company's financial reports to shareholders and creditors, and raises business considerations that must not be overlooked. In addition, special interpretive problem areas and deficiencies present in the statute should give pause to taxpayers contemplating a switch to LIFO. This Note will analyze various considerations pertinent to the adoption and use of the LIFO inventory accounting method--the technical requirements for a switch to LIFO, the conformity-of-financial-reports requirement, a special problem in the consolidated financial statement area, termination problems, a deficiency in the statute regarding involuntary liquidations, and the business considerations presented by this type of change.