Taxpayers are not permitted to adopt LIFO for tax purposes if they use FIFO for financial reporting purposes such as reports to shareholders or creditors.

Question

Quizplus · Accepted Answer

This statement is true. The IRS requires that taxpayers use the same method of inventory accounting for both tax and financial reporting purposes. If a taxpayer uses FIFO for financial reporting purposes, they must also use FIFO for tax purposes. If they use LIFO for tax purposes, they must also use LIFO for financial reporting purposes. This is to ensure consistency and accuracy in financial reporting and tax filings.

Taxpayers Are Not Permitted to Adopt LIFO for Tax Purposes