Section 473 Relief Request for DVM LIFO Taxpayers
Many dealers using the LIFO (Last-In, First-Out) Method for valuing their inventories are facing unexpected high tax bills this year. This is resulting from the combination of lower year-end inventories and the recapture of their LIFO reserves.
There is an obscure tax provision – Section 473 – which could provide relief for some of these dealers. Efforts are being pursued to convince the Treasury/Internal Revenue Service to provide alternative safe harbor calculation relief. Dealers and their CPAs should be aware of these requests. But there is nothing specific to report at this time on this development.
Since tax returns will be due soon, there is no harm in specifically including an election requesting relief under Section 473 as part of the 2020 income tax return when it is filed ... even though the exact nature of the relief is not yet known.
Hopefully, clarifying assistance from the IRS or Treasury will be forthcoming soon.
~ Will De Filipps