View all text of Subpart D [§ 471 - § 475]
§ 473. Qualified liquidations of LIFO inventories
(a) General ruleIf, for any liquidation year—
(1) there is a qualified liquidation of goods which the taxpayer inventories under the LIFO method, and
(2) the taxpayer elects to have the provisions of this section apply with respect to such liquidation,
then the gross income of the taxpayer for such taxable year shall be adjusted as provided in subsection (b).
(b) Adjustment for replacementsIf the liquidated goods are replaced (in whole or in part) during any replacement year and such replacement is reflected in the closing inventory for such year, then the gross income for the liquidation year shall be—
(1) decreased by an amount equal to the excess of—
(A) the aggregate replacement cost of the liquidated goods so replaced during such year, over
(B) the aggregate cost of such goods reflected in the opening inventory of the liquidation year, or
(2) increased by an amount equal to the excess of—
(A) the aggregate cost reflected in such opening inventory of the liquidated goods so replaced during such year, over
(B) such aggregate replacement cost.
(c) Qualified liquidation definedFor purposes of this section—
(1) In generalThe term “qualified liquidation” means—
(A) a decrease in the closing inventory of the liquidation year from the opening inventory of such year, but only if
(B) the taxpayer establishes to the satisfaction of the Secretary that such decrease is directly and primarily attributable to a qualified inventory interruption.
(2) Qualified inventory interruption defined
(A) In general
(B) Determination by SecretaryWhenever the Secretary, after consultation with the appropriate Federal officers, determines—
(i) that—(I) any Department of Energy regulation or request with respect to energy supplies, or(II) any embargo, international boycott, or other major foreign trade interruption,
has made difficult or impossible the replacement during the liquidation year of any class of goods for any class of taxpayers, and
(ii) that the application of this section to that class of goods and taxpayers is necessary to carry out the purposes of this section,
he shall publish a notice of such determinations in the Federal Register, together with the period to be affected by such notice.
(d) Other definitions and special rulesFor purposes of this section—
(1) Liquidation year
(2) Replacement year
(3) Replacement periodThe term “replacement period” means the shorter of—
(A) the period of the 3 taxable years following the liquidation year, or
(B) the period specified by the Secretary in a notice published in the Federal Register with respect to that qualified inventory interruption.
Any period specified by the Secretary under subparagraph (B) may be modified by the Secretary in a subsequent notice published in the Federal Register.
(4) LIFO method
(5) Election
(A) In general
(B) Irrevocable election
(e) Replacement; inventory basisFor purposes of this chapter—
(1) Replacements
(2) Amount at which replacement goods taken into account
(f) Special rules for application of adjustments
(1) Period of limitationsIf—
(A) an adjustment is required under this section for any taxable year by reason of the replacement of liquidated goods during any replacement year, and
(B) the assessment of a deficiency, or the allowance of a credit or refund of an overpayment of tax attributable to such adjustment, for any taxable year, is otherwise prevented by the operation of any law or rule of law (other than section 7122, relating to compromises),
then such deficiency may be assessed, or credit or refund allowed, within the period prescribed for assessing a deficiency or allowing a credit or refund for the replacement year if a notice for deficiency is mailed, or claim for refund is filed, within such period.
(2) Interest
(g) Coordination with section 472
(Added Pub. L. 96–223, title IV, § 403(a)(1), Apr. 2, 1980, 94 Stat. 302.)