Duck Company has valued its inventories at FIFO cost for the past 10 years.The company would like to change to the LIFO method,effective in 2013.
A) The election to change can be made with the 2013 tax return and the beginning inventory for 2013 will be the same as the FIFO inventory at the end of 2012 and no § 481 adjustment is required.
B) The beginning inventory value for 2013 must be computed as though the company had been using LIFO in all prior years and a § 481 adjustment is required.
C) The taxpayer must apply in 2012 for permission to change methods effective in 2013.
D) Duck must amend all prior years' tax returns to compute income by the LIFO method.
E) None of the above.

Question

Quizplus · Accepted Answer

A company can change its inventory valuation method from FIFO to LIFO by filing Form 970 with its tax return for the year of change. The beginning inventory for the year of change is the same as the ending inventory of the previous year under FIFO, and no § 481 adjustment is required.

Duck Company Has Valued Its Inventories at FIFO Cost for the Past