Form 970 (Rev. 11-2012)
Section references are to the Internal Revenue Code unless
For the latest information about developments related to Form
970 and its instructions, such as legislation enacted after they
were published, go to www.irs.gov/form970.
Purpose of Form
Form 970 is filed with your income tax return to elect to use the
last-in, first-out (LIFO) inventory method described in section
472. If you prefer, you can file an election statement that gives
the same information requested on Form 970.
How To Use Form 970
You must complete Parts I, II, and VI. In addition, complete
Parts III, IV, and V, as applicable.
When To File
File Form 970 (or a similar statement) with your tax return for
the first tax year you intend to use the LIFO method.
If you filed your return for the tax year in which you wish to
use the LIFO inventory method described in section 472
without making the election, you can make the election by filing
an amended return within 12 months of the date you filed your
original return. Attach Form 970 (or similar statement) to the
amended return and write “Filed pursuant to section
301.9100-2” at the top of Form 970. File the amended return at
the same address the original return was filed.
Change From LIFO Method
Once you adopt the LIFO method, it is irrevocable unless the
IRS allows you to change to another method. To request
approval to change from the LIFO inventory method, you can
use the automatic change request procedures or the advance
consent request procedures. For details about these two
procedures under which an applicant can request a change in
accounting method, see Purpose of Form under General
Instructions in the Instructions for Form 3115, Application for
Change in Accounting Method. For more information, also see
the List of Automatic Accounting Method Changes in the
Instructions for Form 3115.
LIFO Recapture Amount
A C corporation must include in gross income a LIFO recapture
amount (defined below) if it:
1. Used the LIFO method for its last tax year before the first
tax year for which an election to be taxed as an S corporation
becomes effective, or
2. Transferred LIFO inventory assets to an S corporation in a
nonrecognition transaction in which those assets constitute
transferred basis property.
The LIFO recapture amount is the amount by which the C
corporation’s inventory amount of the inventory assets using the
first-in, first-out (FIFO) method exceeds the inventory amount of
such assets under the LIFO method at the close of the C
corporation’s last tax year as a C corporation (or for the year of
the transfer, if 2, above, applies).
For additional information on LIFO recapture, see
Regulations section 1.1363-2 and Rev. Proc. 94-61, 1994-2
C.B. 775. Also see the Instructions for Form 1120 and the
Instructions for Form 1120S.
Name and Identification Number
Enter the name of the filer on the first line of page 1 of Form
970. In general, the filer of the Form 970 is the applicant.
However, if Form 970 is filed on behalf of the applicant, enter
the filer’s name and identification number on the first line of
Form 970 and enter the applicant’s name and identification
number on the second line. An individual’s identifying number is
his or her social security number. For all others, it is the entity’s
employer identification number.
Part I—Statement of Election under Section
Line 1. Enter the tax year the LIFO inventory method will first
be used and list the inventory items for which you will use this
method. Include only inventory items that are not already
covered under a previous LIFO election. Attach a detailed
analysis of all of your inventories as of the beginning and end of
the first tax year the LIFO method will be used and the
beginning inventory of the preceding tax year. Also, include the
ending inventory reported on your tax return for the preceding
tax year. See Regulations sections 1.472-2 and 1.472-3 for
more details on preparing this analysis.
Part III—Specific Goods (Unit) Method
Line 12. See Regulations section 1.472-2 for more information.
Part IV—Dollar-Value Method
Line 15. Provide sufficient information to justify the pooling
method you are using. Retailers, wholesalers, jobbers, and
distributors are required to pool their goods by major lines,
types, or classes, as authorized under Regulations section
1.472-8(c). Manufacturers or processors can use the natural
business unit pooling method, as authorized by Regulations
section 1.472-8(b)(1), or can establish multiple pools of similar
items in lieu of natural business unit pools, under Regulations
section 1.472-8(b)(3)(i). Multiple pools include raw materials
content pools authorized by Regulations section
Eligible small businesses can establish pools under the
simplified dollar-value LIFO method (discussed below).
Manufacturers or processors using the inventory price index
computation (IPIC) method can establish pools based on the 2-
digit commodity codes in Table 6 of the Producer Price Index
(PPI) Detailed Report. A retailer using the IPIC method can
establish pools based on either the general expenditure
categories in Table 3 of the Consumer Price Index (CPI) Detailed
Report or on the 2-digit commodity codes in Table 6 of the PPI
Detailed Report. A wholesaler, jobber, or distributor using the
IPIC method can establish pools based on the 2-digit
commodity codes in Table 6 of the PPI Detailed Report. The PPI
and CPI Detailed Reports are published monthly by the U.S.
Bureau of Labor Statistics (BLS). Under the IPIC method, you
can also combine pools under special 5% rules. See
Regulations sections 1.472-8(b)(4) and 1.472-8(c)(2) for more
Describe any other method of pooling used.
Simplified dollar-value LIFO method. If your average
annual gross receipts for the 3 preceding tax years did not
exceed $5 million, you can elect to use the simplified dollar-
value LIFO method. If the taxpayer is a member of a controlled
group, the gross receipts of the group are used to determine if
the taxpayer qualifies. This method requires that the taxpayer