Vehicle Pool Benefits & Opportunities
IRS reverses course on dealership LIFO pooling after three decades Revenue Procedure 2008-23 - Vehicle Pool Method
Confusion over which LIFO pool SUVs, mini-vans, and crossovers should be included in is finally over. With the release of Rev. Proc. 2008-23, auto dealerships may now group all light-duty vehicles (cars, trucks and crossovers) in one LIFO pool.
This new pooling method should help prevent dealerships from liquidating LIFO layers if the recent shift to selling more crossover vehicles and trucks reverses itself and dealerships return to selling more cars.
Can potentially increase the LIFO benefit in the year of change and future years especially when dealerships have measurable swings in car and truck inventories due to cyclical and model demand.
CPA and Dealership Opportunities:
- One LIFO pool as opposed to two or more LIFO pools will always yield a better LIFO benefit in the long run as periodic swings in inventory have less possibility of creating a decrement that could erode significant LIFO benefit trapped in the earlier layers.
- For automotive dealerships, where changing model popularity and manufacturer's mandates often dictate inventory mix and total inventory value, significant inventory swings are very likely. This makes them the perfect candidate to consolidate into fewer pools. This new Revenue Procedure gives them this opportunity.
- In addition, dealerships and CPAs who are spending time segregating cars, trucks and crossovers currently into two pools will no longer have to go through this time consuming process.
- SourceHOV | Tax has performed auto LIFO services for 25-years and is recognized as the industry expert. Our service fees for this new change are far less than any auto dealership CPA might invest when compared to time, ramp up, and value received.
Why Accounting Firms & Dealerships Are Choosing SourceHOV | Tax:
- We perform all required layer work.
- We update the base year in accordance with CCA 200825044.
- We combine the existing new car and new truck pools into the required single new vehicle pool in accordance with Treasury Regulation §1.472-8(g).
- We prepare Form 3115, Application for Change in Accounting Method, including necessary attachments describing present and proposed pooling methods.
- If changing for the 2007 tax year we recalculate the inflation index under one single new vehicle pool and recalculate the LIFO reserve using new inflation index and combined inventory values.
IRS Web Source: http://www.irs.gov/newsroom/article/0,,id=179893,00.html