Who can benefit from LIFO?
Good candidates for LIFO include manufacturers, wholesalers and retailers that are experiencing inflation and carry a minimum year-end inventory of $500,000 or more. Those who fit the criteria may use potentially substantial 2004 inflation to significantly reduce federal income taxes with LIFO. What is LIFO? LIFO enables a business, on a once-a-year basis, to defer income based on inventory inflation. There are many different LIFO methods, but in January of 2002 the IRS issued updated regulations for a method that has been available for more than twenty years. Inventory Price Index Computation (IPIC) LIFO is a specific method using government-published (Bureau of Labor Statistics) indexes to measure domestic inflation. The new regulations issued in 2002 made the IPIC method much more taxpayer-favorable by allowing businesses to use 100 percent of the inflation measured by the government published indexes. Prior to these new regulations, taxpayers could only use 80 percent of the inflat
