In periods of rising prices, the LIFO method of inventory valuation gives a lower taxable income and thus provides a tax advantage.

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LIFO (Last-In-First-Out) method assumes that the most recently purchased inventory is sold first, which results in higher cost of goods sold and a lower ending inventory value. This leads to lower taxable income as the cost of goods sold is higher, which provides a tax advantage during periods of rising prices.

In Periods of Rising Prices, the LIFO Method of Inventory