SECTION 10. PAPERWORK

REDUCTION ACT

The collections of information con

change to the Alternative LIFO Method under Rev. Proc. 97–27, 1997–21 I.R.B. 10. .03 Conditions. An automobile dealer changing to the Alternative LIFO Method must comply with the following conditions:

(1) the automobile dealer must keep its books and records for the year of change and for later taxable years on the LIFO inventory method and use the LIFO inventory method for all reports, including consolidated financial statements, if any, and statements for credit purposes, in conformity with the provisions of § 1.472–2(e) of the regulations;

(2) the automobile dealer must value its inventory of new automobiles and new light-duty trucks as of the end of the year of change and for later taxable years under the Alternative LIFO Method, as provided in section 4 of this revenue procedure, unless it obtains permission to change to another recognized method;

(3) the automobile dealer changing from the IPIC method for its inventory of parts and accessories, used automobiles, and used trucks must value its inventory of parts and accessories, used automobiles and used trucks as of the end of the year of change and for later taxable years under the methods provided in section 10.03(2)(b) of the APPENDIX of Rev. Proc. 97–37, unless it obtains permission to change to another recognized method;

(4) the conversion from the specific goods method, if applicable, to the dollar-value method must be made in accordance with § 1.472–8(f)(2);

(5) the automobile dealer must file Form 970, Application to Use LIFO Inventory Method, with its federal income tax return for the year of change and otherwise comply with the provisions of § 472(d) and § 1.472–3 ( see also Rev. Rul. 76–282, 1976–2 C.B. 137) to extend the LIFO election (i) to include any new automobiles and new light-duty trucks (for example, demonstrators) to which the LIFO election did not previously apply but that are required to be included in LIFO pools under the Alternative LIFO Method, and (ii) for an automobile dealer changing from the IPIC method, to include any parts and accessories, used automobiles, and used trucks, to which the LIFO election did not previously apply but that are required to be in

cluded in LIFO pools under section 10.03 of the APPENDIX to Rev. Proc. 97–37, as of the beginning of the year of change;

(6) the automobile dealer must effect the change to the Alternative LIFO Method, and in the case of an automobile dealer changing from the IPIC method to the methods provided in section 10.03(2)(b) of the APPENDIX of Rev. Proc. 97–37, using the cut-off method. Under the cut-off method, the value of the automobile dealer’s new automobile and new light-duty truck inventory, and in the case of an automobile dealer changing from the IPIC method, the parts and accessories, used automobile, and used truck inventory, at the beginning of the year of change must be the same as the value of such inventory at the end of the preceding taxable year plus market value restorations, if any, required pursuant to section 5.03(5) of this revenue procedure;

(7) the automobile dealer must combine and/or separate the dollar-value inventory pool or pools, including any pool resulting from section 5.03(4) of this revenue procedure, if applicable, to conform to the inventory pooling rules provided in section 4 of this revenue procedure, and in the case of an automobile dealer changing from the IPIC method, to the inventory pooling rules provided in section 10.03(2)(b) of the APPENDIX of Rev. Proc. 97–37, in accordance with the provisions of § 1.472–8(g)(2);

(8) in effecting the changes, any layers of inventory increments previously determined and the LIFO value of such increments must be retained. Instead of using the earliest taxable year for which the automobile dealer adopted the LIFO method for any items in the inventory pool or pools, the year of change must be used as the base year in determining the LIFO value of the inventory pool or pools for the year of change and later taxable years (the cumulative index at the beginning of the year of change will be 1.00). The base-year costs of layers of increments in the pool or pools at the beginning of the year of change must be restated in terms of the new base-year costs, using the year of change as the new base year; and

(9) the automobile dealer must maintain and retain complete records of

1997–33 I.R.B. 17 August 18, 1997

tained in this revenue procedure have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1551. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this revenue procedure are in section 5. This information is necessary and will be used to determine whether the taxpayer is properly using the Alternative LIFO Method. The collections of information are required for the taxpayer to use the Alternative LIFO Method. The likely recordkeepers are individuals, business or other for-profit institutions, and small businesses or organizations.

The estimated total annual recordkeeping burden is 200,000 hours.

The estimated annual burden per recordkeeper is 25 hours. The estimated number of recordkeepers is 8,000.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

DRAFTING INFORMATION

This revenue procedure was drafted in the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Richard H. Berken on 202622-4970 (not a toll-free call).

26 CFR 601.204: Changes in accounting periods and in methods of accounting.

(Also Part I, §§ 162, 165, 166, 167, 168, 197, 263, 263A, 446, 451, 454, 455, 461, 471, 472, 481, 585, 1273, 1281, 1363; 1.165–2, 1.167(e)–1, 1.263(a)–2, 1.263A–1, 1.263A–3, 1.446–1, 1.454–1, 1.455–6, 1.461–4, 1.461–5, 1.471–1, 1.471–2, 1.471–3, 1.472–6, 1.472–8, 1.481–1, 1.481–4, 1.1273–1, 1.1273–2.)

Rev. Proc. 97–37

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