§474 Simplified dollar-value LIFO method for certain small businesses

Summary

Lets small businesses use an easier dollar‑value LIFO way to price inventory for taxes. You keep separate inventory pools for each big category in a government price index and change each pool based on how that index part moved from the prior year. The Producer Price Index is used in most cases. Retailers using the retail method use the Consumer Price Index. You can choose this method without IRS permission. The choice applies to the year you pick it and to later years while you stay eligible. A business is eligible if its average annual gross receipts for the 3 previous taxable years are $5,000,000 or less. If you are in a controlled group, all members count as one for figuring receipts. When you start or stop the method, set up pools by the index categories, keep the same total dollar amount at the start of the change year as at the end of the prior year, and treat that year as a new base year under the LIFO rules. Defined terms (one line each): simplified dollar‑value method = the simpler dollar‑value LIFO pricing approach; government price index = PPI normally or CPI for retailers using the retail method; major category = broad index groups (2‑digit industry groups for PPI or general spending groups for CPI); eligible small business = average gross receipts ≤ $5,000,000 over the 3 prior years; LIFO method = the tax LIFO rules; year of change = the first year you start or first year after you stop using this method.