SECTION 2. BACKGROUND

.01 Section 472(a) of the Internal Revenue Code authorizes a taxpayer to use the LIFO inventory method in accordance with regulations prescribed by the Secretary.

.02 Section 1.472–8(a) of the Income Tax Regulations provides that a taxpayer may elect to determine the cost of its LIFO inventories under the dollar-value LIFO method, provided that method is used consistently and clearly reflects the taxpayer’s income.

1998–37 I.R.B. 9 September 14, 1998

using the retail inventory method, the index selected must be the index as of the last month of the taxpayer’s taxable year. Id. Taxpayers that do not use the retail method must select indexes as of the month or months most appropriate to the taxpayer’s method of determining the current-year cost of the inventory pool under § 1.472–8(e)(2)(ii), or make a one-time binding election of an appropriate representative month during the taxable year. Id.

.07 The BLS frequently makes changes to the categories included in the CPI or PPI. For example, the BLS revised the categories of goods listed in the January 1998 CPI by introducing some new categories as of January 1998 and eliminating or resetting some existing categories as of December 1997. Consequently, January 1999 will be the first month for which it is possible to compute a percent change for a 12-month period with reference to the BLS published indexes for any affected index category (as described in section 3 of this revenue procedure). Moreover, the BLS did not publish weights for some index categories.