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Form 970 Application To Use LIFO Inventory Method OMB No. 1545-0042

(Rev. November 2020) ▶ Attach to your tax return. Attachment
Department of the Treasury ▶ Go to www.irs.gov/Form970 for the latest information. Sequence No. 122
Internal Revenue Service
Name of filer (name of parent corporation if a consolidated group) (see instructions) Filer’s identification number (see instructions)

Name of applicant(s) (if different from filer) and identification number(s)

Part I Statement of Election Under Section 472 Yes No

1 The applicant elects to use the LIFO inventory method for the tax year ending (enter month, day, year) ▶
for the following goods (enter here):
See instructions and attach a statement if necessary.

2 In an attached statement, identify and describe the inventory method(s) used by the applicant in the prior tax year
for the goods covered by this election.

3 a Is the applicant already using the LIFO inventory method for any other goods? . . . . . . . . . . . .
b If “Yes” to line 3a, attach a statement identifying and describing the goods and the LIFO methods used.

4 a Has the applicant ever used the LIFO inventory method for the goods covered by this election? . . . . . .
b If “Yes” to line 4a, attach a statement listing the tax years for which the LIFO inventory method was used and
explaining why the LIFO inventory method was discontinued.

5 The applicant will not use the LIFO inventory method to account for the following goods (enter here): ▶

Attach a statement if necessary.
Part II LIFO Inventory Requirements Yes No
6 a Did the applicant value the closing inventories of goods covered by this election at cost for the tax year
immediately preceding the tax year specified on line 1? . . . . . . . . . . . . . . . . . . .
b If “No” to line 6a, did the applicant value the beginning inventories of goods covered by this election at cost for
the tax year specified on line 1 as required by section 472(d)? . . . . . . . . . . . . . . . . .
If “No” to line 6b, attach an explanation.
c If “Yes” to line 6b, will the applicant account for the adjustment required by section 472(d) over a 3-year period?
If “No” to line 6c, attach an explanation.

7 a When determining the beginning inventories of goods covered by this election, did the applicant treat those goods
as being acquired for a unit cost that is equal to the total cost of those goods divided by the total number of units
on hand? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b If “No” to line 7a, attach an explanation.

8 a Did the applicant (or any member of the same group of financially related corporations as defined in section
472(g)) issue credit statements or reports to shareholders, partners, other proprietors, or beneficiaries covering the
tax year specified on line 1? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b If “Yes” to line 8a, attach a statement describing the recipient(s), the date(s) of issuance, and the inventory
method(s) used to determine income, profit, or loss in those statements.

9 a Will the applicant determine beginning and ending inventories at cost regardless of market value? . . . . .
b If “No” to line 9a, attach an explanation.

10 a As a condition of adopting the LIFO inventory method, Regulations section 1.472-4 requires a taxpayer to agree
to make any adjustments incident to the change to, the change from, or the use of, the LIFO inventory method
that, upon the examination of the taxpayer’s income tax return, the IRS determines are necessary to clearly reflect
income. Does the applicant agree to this condition? . . . . . . . . . . . . . . . . . . . . .
b If “No” to line 10a, the applicant is not eligible to use the LIFO inventory method and does not need to file Form 970.
Part III Specific Goods (Unit) Method
11 Under Regulations section 1.472-1, the types of goods in the opening inventory must be compared with similar types of goods
in the closing inventories. Attach a list of the types or categories of goods that will be compared, describe the goods that will
be included in each type or category, and identify the unit of measure (pounds, barrels, feet, etc.) used for each type or
category.
For Paperwork Reduction Act Notice, see the instructions. Cat. No. 17057T Form 970 (Rev. 11-2020)

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Form 970 (Rev. 11-2020) Page 2
Part III Specific Goods (Unit) Method (continued)
12 Check the box corresponding to the method that the applicant will use to determine the cost of the goods in the closing
inventories in excess of the cost of the goods in the opening inventories. See instructions.
Actual cost of goods most recently purchased or produced
Average cost of goods purchased or produced during the tax year
Actual cost of goods purchased or produced in the order of acquisition
Other (attach explanation)

Part IV Dollar-Value Method
13 Attach a statement describing the applicant’s method of defining “items.”

14 a Did the applicant acquire any of the goods covered by this election at below-market prices? . . . . . Yes No
b If “Yes” to line 14a, attach a statement explaining whether the applicant did, or will, account for the goods purchased at
below-market prices and similar goods produced or acquired at market prices as separate items. If the applicant did, or will,
account for both types of goods as the same item, explain and justify.

15 Attach a statement describing the method of pooling the applicant will use for the goods covered by this election. If the
applicant will use more than one dollar-value pool, list and describe the contents of each dollar-value pool. See instructions.

16 Identify or describe the method the applicant will use to compute the LIFO value of each dollar-value pool containing goods
covered by this election (for example, double-extension method, link-chain method, or index method).

If the applicant’s method is neither the double-extension method nor the Inventory Price Index Computation method, attach a
statement describing the method in detail and justifying the applicant’s use of the selected method. See instructions.
17 Check the box corresponding to the method the applicant will use to determine the current-year cost of goods in the closing
inventories and to value the LIFO increments of the dollar-value pool(s). See instructions.
Actual cost of goods most recently purchased or produced
Average cost of goods purchased or produced during the tax year
Actual cost of goods purchased or produced in the order of acquisition
Other (attach explanation)

Part V Inventory Price Index Computation (IPIC) Method
18 Check the box corresponding to the method the applicant will use to compute the LIFO value of each dollar-value pool
containing goods covered by this election. See instructions.
Double-extension IPIC method
Link-chain IPIC method

19 Check the box corresponding to the table from which the applicant will select Bureau of Labor Statistics (BLS) price indexes.
See instructions.
Table 3 of the Consumer Price Index (CPI) Report
Table 6 of the Producer Price Index (PPI) Detailed Report
Other table of the PPI Detailed Report
If the applicant will use “Other table of the PPI Detailed Report,” attach a statement explaining why the other table is more
appropriate than Table 6.

20 Will the applicant use the 10 percent method? See instructions . . . . . . . . . . . . . . . Yes No

21 If the applicant elects to use a representative month for selecting BLS price indexes from the applicable report, enter the
representative month elected for each dollar-value pool.
See instructions and attach a statement if necessary.
Part VI Other Information
22 Attach a statement describing the applicant’s method of determining the cost of inventory items (for example, standard cost
method, actual invoice cost, joint product cost method, or retail inventory method).
23 Did the applicant receive IRS consent to change the method of valuing inventories for the tax year specified
on line 1? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No
Form 970 (Rev. 11-2020)

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Form 970 (Rev. 11-2020)                                                                                                          Page  3 

General Instructions                                               Specific Instructions 
Section references are to the Internal Revenue Code unless         Name and Identification Number 
otherwise noted. 
                                                                   Enter the name of the filer on the first line of page 1 of Form  
Future Developments                                                970. In general, the filer of the Form 970 is the applicant.  
For the latest information about developments related to Form      However, if Form 970 is filed on behalf of the applicant, enter  
970 and its instructions, such as legislation enacted after they   the filer’s name and identification number on the first line of 
were published, go to www.irs.gov/Form970.                         Form 970 and enter the applicant’s name and identification  
                                                                   number on the second line. An individual’s identifying number is 
Purpose of Form                                                    his or her social security number. For all others, it is the entity’s 
Form 970 is filed with your income tax return to elect to use the  employer identification number.  
last-in, first-out (LIFO) inventory method described in section 
472. If you prefer, you can file an election statement that gives  Part I—Statement of Election Under Section 
the same information requested on Form 970.                        472 
                                                                   Line 1. Enter the tax year the LIFO inventory method will first  
How To Use Form 970                                                be used and list the inventory items for which you will use this 
You must complete Parts I, II, and VI. In addition, complete       method. Include only inventory items that are not already  
Parts III, IV, and V, as applicable.                               covered under a previous LIFO election. Attach a detailed  
                                                                   analysis of all of your inventories as of the beginning and end of 
When To File                                                       the first tax year the LIFO method will be used and the  
File Form 970 (or a similar statement) with your tax return for    beginning inventory of the preceding tax year. Also, include the 
the first tax year you intend to use the LIFO method.              ending inventory reported on your tax return for the preceding 
If you filed your return for the tax year in which you wish to     tax year. See Regulations sections 1.472-2 and 1.472-3 for 
use the LIFO inventory method described in section 472             more details on preparing this analysis. 
without making the election, you can make the election by filing 
an amended return within 12 months of the date you filed your      Part III—Specific Goods (Unit) Method 
original return. Attach Form 970 (or similar statement) to the     Line 12. See Regulations section 1.472-2 for more information. 
amended return and write “Filed pursuant to section 
301.9100-2” at the top of Form 970. File the amended return at     Part IV—Dollar-Value Method 
the same address the original return was filed.                    Line 15. Provide sufficient information to justify the pooling  
                                                                   method you are using. Retailers, wholesalers, jobbers, and  
Change From LIFO Method                                            distributors are required to pool their goods by major lines,  
Once you adopt the LIFO method, it is irrevocable unless the       types, or classes, as authorized under Regulations section  
IRS allows you to change to another method. To request             1.472-8(c). Manufacturers or processors can use the natural  
approval to change from the LIFO inventory method, you can         business unit pooling method, as authorized by Regulations  
use the automatic change procedures or the non-automatic           section 1.472-8(b)(1), or can establish multiple pools of similar 
change procedures. For details, see Form 3115, Application for     items in lieu of natural business unit pools, under Regulations 
Change in Accounting Method. Also see the Instructions for         section 1.472-8(b)(3)(i). Multiple pools include raw materials 
Form 3115.                                                         content pools authorized by Regulations section              
                                                                   1.472-8(b)(3)(ii). 
LIFO Recapture Amount                                              Eligible small businesses can establish pools under the  
A C corporation must include in gross income a LIFO recapture      simplified dollar-value LIFO method (discussed below). 
amount (defined below) if it:                                      Manufacturers or processors using the inventory price index 
1. Used the LIFO method for its last tax year before the first     computation (IPIC) method can establish pools based on the  
tax year for which an election to be taxed as an S corporation     commodity codes in Table 6 of the Producer Price Index (PPI) 
becomes effective, or                                              Detailed Report. A retailer using the IPIC method can establish 
2. Transferred LIFO inventory assets to an S corporation in a      pools based on either the general expenditure categories in 
nonrecognition transaction in which those assets constitute        Table 3 of the Consumer Price Index (CPI) Report or on the 
transferred basis property.                                        commodity codes in Table 6 of the PPI Detailed Report. A 
The LIFO recapture amount is the amount by which the C             wholesaler, jobber, or distributor using the IPIC method can 
corporation’s inventory amount of the inventory assets using the   establish pools based on the commodity codes in Table 6 of the 
first-in, first-out (FIFO) method exceeds the inventory amount of  PPI Report. The PPI and CPI Reports are published monthly by 
such assets under the LIFO method at the close of the C            the U.S. Bureau of Labor Statistics (BLS). Under the IPIC 
corporation’s last tax year as a C corporation (or for the year of method, you can also combine pools under special 5% rules. 
the transfer, if (2) above applies).                               See Regulations sections 1.472-8(b)(4) and 1.472-8(c)(2) for 
For additional information on LIFO recapture, see                  more information. 
Regulations section 1.1363-2 and Rev. Proc. 94-61, 1994-2          Describe any other method of pooling used. 
C.B. 775. Also see the Instructions for Form 1120 and the          Simplified dollar-value LIFO method. An eligible small 
Instructions for Form 1120-S.                                      business can elect to use the simplified dollar-value LIFO 
                                                                   method. See sections 474(c) and 448(c)(3). If you are a member 
                                                                   of a controlled group, the gross receipts of the group are used 
                                                                   to determine if you qualify. This method requires that you

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Form 970 (Rev. 11-2020) Page 4

maintain a separate inventory pool for items in each major Line 19. Manufacturers, processors, wholesalers, jobbers, and
category in the applicable government price index, and that you distributors must select BLS price indexes from Table 6 of the
make adjustments to each separate pool based on changes PPI Detailed Report, unless the taxpayer can demonstrate that
from the preceding tax year in the component of such index for selecting BLS price indexes from another table of the PPI
the major category. You do not need IRS consent to elect these Detailed Report is more appropriate. Retailers can select BLS
provisions. The election is in effect for the first year the election price indexes from either Table 3 of the CPI Report or from
is made and for each succeeding year you qualify as an eligible Table 6 (or another more appropriate table) of the PPI Detailed
small business. The election can be revoked only with IRS Report.
consent. Line 20. See Regulations section 1.472-8(e)(3)(iii)(C)(2) for a
The simplified dollar-value method requires that general description of the 10 percent method.
categories of inventory pools be established. The general Line 21. See Regulations section 1.472-8(e)(3)(iii)(B)(3) before
categories are based on categories of inventory items completing line 21.
contained in the PPI Detailed Report or the CPI Report. See
section 474 and Regulations section 1.472-8 for more details. Part VI—Other Information
Line 16. Generally, you can only use the double-extension Line 23. If you filed Form 3115 and received IRS consent to
method or the inventory price index computation method. See change your method of valuing inventories for the tax year
Regulations sections 1.472-8(e)(2) and 1.472-8(e)(3) for a specified on line 1, do not attach a copy of the approval letter
description of these methods. However, if you use the link- (consent agreement). Retain a copy of the letter for your
chain, index, or “other” method, attach a detailed statement records.
explaining how the method is justified under Regulations section
1.472-8(e)(1). In addition, if you use a link-chain method, your Privacy Act and Paperwork Reduction Act Notice. We ask for
statement should explain why the nature of the pool makes the the information on this form to carry out the Internal Revenue
double-extension or index method impractical or unsuitable. laws of the United States. You are required to give us the
New Vehicle Alternative LIFO Inventory Method. information. We need it to ensure that you are complying with
Automobile dealers engaged in the trade or business of retail these laws and to allow us to figure and collect the right amount
sales of new automobiles or new light-duty trucks can adopt or of tax. Subtitle B and section 6109, and the regulations require
use the New Vehicle Alternative LIFO Inventory Method under you to provide this information.
Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc. You are not required to provide the information requested on
2008-23, 2008-12 I.R.B. 664, or any succesor. A new a form that is subject to the Paperwork Reduction Act unless
automobile dealer who previously elected this method under the form displays a valid OMB control number. Books or
Rev. Proc. 92-79, 1992-2 C.B. 457 is not required to change its records relating to a form or its instructions must be retained as
method of accounting to comply with Rev. Proc. 97-36. For long as their contents may become material in the
information on accounting method changes to this method, see administration of any Internal Revenue law. Generally, tax
section 23.03 of Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, or returns and return information are confidential, as required by
any successor. section 6103. However, section 6103 allows or requires the
Used Vehicle Alternative LIFO Inventory Method. Internal Revenue Service to disclose information from this form
Automobile dealers engaged in the trade or business of retail in certain circumstances. For example, we may disclose
sales of used automobiles or used light-duty trucks can adopt information to the Department of Justice for civil or criminal
or use the Used Vehicle Alternative LIFO Inventory Method as litigation, and to cities, states, the District of Columbia, and U.S.
described in Rev. Proc. 2001-23, 2001-10 I.R.B. 784, as commonwealths or possessions for use in administering their
modified by Announcement 2004-16, 2004-1 I.R.B. 668, and tax laws. We may also disclose this information to other
Rev. Proc. 2008-23, or its successor. For information on countries under a tax treaty, to federal and state agencies to
accounting method changes to this method, see section 23.04 enforce federal nontax criminal laws, or to federal law
of Rev. Proc. 2019-43, or any successor, and change number enforcement and intelligence agencies to combat terrorism.
59 in the List of DCNs in the Instructions for Form 3115. Failure to provide this information, or providing false
Line 17. See Regulations section 1.472-8(e)(2) for more information, may subject you to penalties.
information. The time needed to complete and file this form and related
schedules will vary depending on individual circumstances. The
Part V—Inventory Price Index Computation estimated burden for individual taxpayers filing this form is
(IPIC) Method approved under OMB control number 1545-0074; the estimated
burden for business taxpayers filing this form is approved under
Line 18. See Regulations section 1.472-8(e)(3)(iii)(E) for a OMB control number 1545-0123 and is included in the
description of the double-extension and link-chain IPIC estimates shown in the instructions for their individual and
methods, including examples. The use of either of these IPIC business income tax return. The estimated burden for all other
methods is a method of accounting. For information on taxpayers who file this form is shown below.
accounting method changes to or within an IPIC method, see
change numbers 61 and 62 in the List of DCNs in the Recordkeeping . . . . . . . . . . 7 hrs., 53 min.
Instructions for Form 3115. Learning about the law or the form . . . . . 4 hrs., 3 min.
Preparing the form . . . . . . . . . . 8 hrs., 5 min.
Sending the form to the IRS . . . . . . . 1 hr., 4 min.
If you have comments concerning the accuracy of these time
estimates or suggestions for making this form and related
schedules simpler, we would be happy to hear from you. See
the instructions for the tax return with which this form is filed.

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