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- Do you prepare a Form 3115 to show your LIFO inventory adjustment when converting from a C Corp to a S Corp on the final C Corp tax return?
Do you prepare a Form 3115 to show your LIFO inventory adjustment when converting from a C Corp to a S Corp on the final C Corp tax return?
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barry-boorn
Level 1
03-14-2021
12:57 PM
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1 Comment 1
PKCPAMST
Level 5
03-14-2021
10:10 PM
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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.
