Rev. Rul. 75-49

The taxpayer, a manufacturing concern, reports its income under an accrual method of accounting on the basis of a calendar year and values its inventory on the first-in, first-out (FIFO) method. In February 1974 the taxpayer issued its annual report to shareholders for 1973 with inventories valued by the FIFO method. However, the taxpayer filed its Federal income tax return for 1973 on March 15, 1974, and elected to use the last-in, first-out (LIFO) inventory method under section 472 of the Internal Revenue Code of 1954 beginning with the taxable year ended December 31, 1973. The specific question presented is whether the taxpayer's issuance of the annual report for 1973 to shareholders wherein inventories were valued at FIFO invalidates its election to use the LIFO method beginning with the taxable year ended December 31, 1973.

Held, the election to use the LIFO method of valuing inventories, beginning with the taxable year ended December 31, 1973, is invalid because the taxpayer has not satisfied the requirements of section 472(c) of the Code and section 1.472-2(e) of the Income Tax Regulations that the taxpayer, in ascertaining income, profit, or loss for the taxable year for which the LIFO method is first used (1973) may not use an inventory method other than the LIFO method for the purposes of reports to shareholders. Reissuance of financial statements for 1973 on the LIFO method will not satisfy this requirement. Likewise, recall of the previously issued financial statements for 1973 on the FIFO method will not meet this requirement.

¹ Also released as TIR-1340, dated January 23, 1975.