[Code of Federal Regulations]
[Title 26, Volume 6]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.472-3]

[Page 522]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.472-3  Time and manner of making election.

    (a) The LIFO inventory method may be adopted and used only if the 
taxpayer files with his income tax return for the taxable year as of the 
close of which the method is first to be used a statement of his 
election to use such inventory method. The statement shall be made on 
Form 970 pursuant to the instructions printed with respect thereto and 
to the requirements of this section, or in such other manner as may be 
acceptable to the Commissioner. Such statement shall be accompanied by 
an analysis of all inventories of the taxpayer as of the beginning and 
as of the end of the taxable year for which the LIFO inventory method is 
proposed first to be used, and also as of the beginning of the prior 
taxable year. In the case of a manufacturer, this analysis shall show in 
detail the manner in which costs are computed with respect to raw 
materials, goods in process, and finished goods, segregating the 
products (whether in process or finished goods) into natural groups on 
the basis of either (1) similarity in factory processes through which 
they pass, or (2) similarity of raw materials used, or (3) similarity in 
style, shape, or use of finished products. Each group of products shall 
be clearly described.
    (b) The taxpayer shall submit for the consideration of the 
Commissioner in connection with the taxpayer's adoption or use of the 
LIFO inventory method such other detailed information with respect to 
his business or accounting system as may be at any time requested by the 
Commissioner.
    (c) As a condition to the taxpayer's use of the LIFO inventory 
method, the Commissioner may require that the method be used with 
respect to goods other than those specified in the taxpayer's statement 
of election if, in the opinion of the Commissioner, the use of such 
method with respect to such other goods is essential to a clear 
reflection of income.
    (d) Whether or not the taxpayer's application for the adoption and 
use of the LIFO inventory method should be approved, and whether or not 
such method, once adopted, may be continued, and the propriety of all 
computations incidental to the use of such method, will be determined by 
the Commissioner in connection with the examination of the taxpayer's 
income tax returns.

[T.D. 6500, 25 FR 11729, Nov. 26, 1960, as amended by T.D. 7295, 38 FR 
34203, Dec. 12, 1973]