PLR 1232013: IRS grants more time to file a LIFO inventory election

Plain-English summary

A taxpayer discovered that it had failed to file Form 970 when it first adopted the last-in, first-out (LIFO) inventory method under IRC § 472. The taxpayer had used the LIFO method in its reports for the relevant year and later years, and promptly requested relief after discovering the omission. The IRS granted a 30-day extension to file Form 970 under the regulatory-election relief rules. The ruling did not express an opinion on whether the taxpayer had otherwise used the LIFO method properly.

Ruling snapshot

• Question: May the taxpayer file Form 970 late to elect the LIFO inventory method?
• Outcome: Approved.
• Key authorities: IRC § 472; Treas. Reg. §§ 1.472-3 and 301.9100-1 through 301.9100-3; § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201232013 Third Party Communication: None
Release Date: 8/10/2012 Date of Communication: Not Applicable
Person To Contact:
Index Number: 9100.11-00 -----------, ID No. -----------------
Telephone Number/Fax Number:
------------------------------------------
-------------------------------------------------- Refer Reply To:
-------------------------------- CC:ITA:6
----------------------- PLR-114943-12
---------------------------------- Date:
May 14, 2012

In Re: Request for Extension of Time to File Form 970, Application To Use LIFO
Inventory Method.

Legend

Taxpayer = --------------------------------------------------
----------------------

Date 1 = --------------------------

Dear ---------------:

This letter is in reply to a private letter ruling request dated March 28, 2012, filed by
Taxpayer. Taxpayer requests an extension of time under § 301.9100-1(c) of the
Procedure and Administration Regulations to file Form 970, Application To Use LIFO
Inventory Method, electing the last-in, first-out inventory method described in § 472 of
the Internal Revenue Code (LIFO inventory method) for Taxpayer’s inventory for the
taxable year ended Date 1. The form is required to be filed by § 1.472-3(a) of the
Income Tax Regulations.

In the process of evaluating a potential change in method of accounting, for its
inventory, Taxpayer discovered that it failed to file Form 970 for the taxable year ending
Date 1. Taxpayer admits that it was required to file a Form 970 because it implemented
the LIFO inventory method described in § 472 in that taxable year and has used the
LIFO inventory method for all subsequent taxable years. Promptly after discovery of
this failure to file a Form 970, Taxpayer filed this request for an extension of time to file
the Form 970. Taxpayer represents that the LIFO inventory method was used by
Taxpayer in its reports to shareholders, partners, or other proprietors, to beneficiaries
and for credit purposes for the taxable year ended Date 1 and for all subsequent taxable
years.
PLR-114943-12 2

Section 472 provides that a taxpayer may use the LIFO method in inventorying goods
specified in an application to use such method, filed at such time, and in such manner,
as the Secretary may prescribe.

Section 1.472-3 provides that the LIFO inventory method may be adopted and used
only if the taxpayer files with its income tax return for the taxable year as of the close of
which the method is first to be used in a statement of its election to use such inventory
method. The statement is to be made on Form 970.

Section 301.9100-1(c) provides that the Commissioner has discretion to grant a
reasonable extension of time under the rules set forth in §§ 301.9100-2 and 301.9100-3
to make certain regulatory elections. Section 301.9100-1(b) defines a regulatory
election as an election whose due date is prescribed by a regulation published in the
Federal Register, or a revenue ruling, revenue procedure, notice, or announcement
published in the Internal Revenue Bulletin.

Section 301.9100-2 provides automatic extensions of time for making certain elections.
Section 301.9100-3 provides extensions of time for making elections that do not meet
the requirements of § 301.9100-2.

Requests for relief under § 301.9100-3 will be granted when a taxpayer provides
evidence to establish to the satisfaction of the Commissioner (1) that the taxpayer acted
reasonably and in good faith, and (2) that granting relief will not prejudice the interests
of the Government. See § 301.9100-3(a).

Based solely on the facts and representations submitted, we conclude that the
requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. Accordingly, we
hereby grant an extension of time for Taxpayer to file Form 970, as required by § 1.472-
3(a). This extension shall be for a period of 30 days from the date of this ruling. Please
attach a copy of this ruling to the Form 970.

The ruling contained in this letter is based upon information and representations
submitted by Taxpayer and accompanied by a penalty of perjury statement executed by
an appropriate party. While this office has not verified any of the materials submitted in
support of the request for rulings, such material is subject to verification on examination.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter. Specifically, we express no opinion as to whether Taxpayer has properly
used the LIFO method.

This ruling is directed only to Taxpayer, the taxpayer requesting it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
PLR-114943-12 3

In accordance with the Power of Attorney on file with this office, copies of this letter are
being sent to Taxpayer’s authorized representatives.

                                              Sincerely,




                                              ROY HIRSCHHORN
                                              Chief, Branch 6
                                              Office of Associate Chief Counsel
                                              (Income Tax & Accounting)