Under Code Sec. 1363(d),  for its last tax year before an S election, a C corporation using the LIFO method  includes the “LIFO recapture amount” in income for the C’s last tax year.

Because the newly elected S corporation will continue to use LIFO method, it is not a change in accounting method. The idea behind Sec. 1363(d) is to prevent a C corporation converting to an S corporation from avoiding tax on the built-in gain tax on LIFO inventory.