The COVID-19 pandemic has completely disrupted supply chains around the world for nearly every business, including automotive dealers, which are experiencing a huge inventory crunch that has impacted their ability to acquire inventory, while customer demand remains high.
The American Institute of CPAs (AICPA) is asking the Internal Revenue Service to help automotive dealers who have been unable to maintain inventory due to the pandemic.
The AICPA requested relief under Section 473 for qualified 税payers that (1) use the last-in, first-out (LIFO) method of accounting for inventory and (2) that have experienced a decrease in their ending inventory because of the ongoing pandemic. For 税payers that account for their inventory under LIFO valuation methodology, when inventory levels significantly decrease, the previous years’ layers are liquidated, and the 税payer must then recognize income. Section 473 relief would allow a qualified 税payer to replace the inventory over a three-year “replacement period,” thus decreasing the significant 税 liabilities that most automotive dealers are experiencing relative to the inventory shortage.
Under Section 473 relief, 税payers would make an election on their timely filed federal income 税 return for the first 税 year following the LIFO layer liquidation year. 对于大多数经销商来说, this election statement would be made on their 2021 income 税 returns, unless they elect a new safe harbor method. The AICPA recommended a new safe harbor method, which would allow a qualified 税payer to disregard the LIFO layer liquidation year and retain the LIFO layers relative to the beginning inventory balances of the liquidation year. If the 税payer increases its inventory balances to pre-COVID levels by the end of the replacement period, no income will need to be recognized on the liquidated layers.
In instances where a dealer’s income 税 return has already been filed for the liquidation year, the AICPA letter requests that the 税payer be able to make a late election by filing an amended return within 90 days of IRS guidance being published, or by filing a Form 3115 Application for Change in Accounting Method with its 2021 income 税 return.
bet9游戏平台 汽车 bet9平台游戏 Group will continue to monitor guidance relative to potential inventory 税 relief. If your dealership has experienced an inventory disruption and you would like to discuss this issue further, please contact any of our 税 advisors.
