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    marinaavet's Avatar
    marinaavet Posts: 18, Reputation: 1
    New Member
    		  
    #1

    Mar 24, 2014, 08:25 PM
    Inventory LCM method?
    If your inventory market values went down significally, can you use LCM to adjust the inventory and record a loss? Please note, the method to value the inventory has been a Cost Method. The IRS states:

    "The value of your inventory is a major factor in figuring your taxable income. The method you use to value the inventory is very important.

    The following methods, described below, are those generally available for valuing inventory.

    • Cost.
    • Lower of cost or market.-LCM
    • Retail."



    So, if LCM has not been used before, does that mean it can't be used this time due to inventory value reduction?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Mar 25, 2014, 07:19 PM
    Yes, I believe that is permitted, but I am NOT sure.
    MLSNC's Avatar
    MLSNC Posts: 158, Reputation: 17
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    #3

    Mar 25, 2014, 08:46 PM
    I think if you have used cost in prior years the change to LCM would be a change in accounting methods which would require filing Form 3115. Some changes are automatic and some require approval and I do not know which one this change would fall under without hitting the books.
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