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 2018.
A)The election to change can be made with the 2018 tax return and the beginning inventory for 2018 will be the same as the FIFO inventory at the end of 2017 and no § 481 adjustment is required.
B)The beginning inventory value for 2018 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 2017 for permission to change methods effective in 2018.
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

When a company changes its inventory valuation method from FIFO to LIFO, it can make the election with the tax return for the year of change, and the beginning inventory for the year of change is the same as the ending inventory of the previous year under FIFO, with no § 481 adjustment required.

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