In deflationary times, you may wish to use a LIFO system to value your ending inventory. In a LIFO storeroom, the most recently purchased products are used and charged, thus reducing current taxes by eliminating inventory profits.

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In deflationary times, using a LIFO (Last In, First Out) system could actually increase your tax liability because the most recently purchased (and in a deflationary environment, cheaper) items are sold first, leaving older, more expensive items in inventory. This could result in higher reported profits and thus higher taxes, contrary to the goal of reducing current taxes.

In Deflationary Times, You May Wish to Use a LIFO