Taxpayers may use the lower of cost or market valuation method in conjunction with FIFO.

Question

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Taxpayers have the option to use the lower of cost or market valuation method in conjunction with the first-in, first-out (FIFO) method of accounting for inventory. This means that if the market value of inventory decreases below its cost, the taxpayer can adjust the inventory value down to its market value for tax purposes.

Taxpayers May Use the Lower of Cost or Market Valuation