Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

Simplified LIFO Method: IRC section 474
All taxpayers, except retailers, may elect this Inventory Price Index (IPI) method applying to
taxable years beginning after 1981. Manufacturers, processors, wholesalers, jobbers and
distributors must use the Producer Prices and Producer Price Index tables. Retailers may use
either the Producer Price Index or Consumer Price Index tables.
Small business taxpayers as defined by IRC section 474, contemplate a taxpayer whose average
annual gross receipts for 3 preceding taxable years does not exceed $5,000,000. They may use
100 percent of the stated index change, whereas taxpayers who exceed the $5,000,000 gross
receipts test may use 80 percent of the change in the BLS indices.
Generally, this IPI method will not be encountered because of the gross receipts test. Auto
dealers gross receipts are usually in excess of $5,000,000 and they want more than the 80 percent
of the change in the BLS indices
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