Alabama Administrative Code
Title 810 - ALABAMA DEPARTMENT OF REVENUE
Chapter 810-3-161 - COMPUTING TAXABLE INCOME OF AN ALABAMA S CORPORATION
Section 810-3-161-.02 - LIFO Recapture
Universal Citation: AL Admin Code R 810-3-161-.02
Current through Register Vol. 42, No. 11, August 30, 2024
(1) Definitions. For purposes of this regulation, the following definitions shall apply:
(a) "LIFO recapture amount" means the
excess of the inventory's value using the FIFO method over its value using the
LIFO method.
1. For purposes of subparagraph
(a), the inventory value means the aggregate amount of the inventory assets
determined as of the end of the last tax year before the corporation converts
to S status.
2. For purposes of
subparagraph (a), the FIFO amount shall be determined by using the retail
method if the corporation uses the retail method to determine the LIFO amount.
If the corporation does not use the retail method to determine the LIFO amount,
then the lower of cost or market method must be used to determine the FIFO
amount.
(b) "LIFO
method" means the method authorized by 26 U.S.C. §
472. For interpretation
of federal statutes adopted by the Alabama legislature, see Rule 810-3-1.1 -.01,
Operating Rules.
(c) "Inventory
assets" means property which would normally be included in inventory of the
corporation at the close of the taxable year.
(2) LIFO Recapture Amount.
(a) Any C corporation which converts to S
corporation status, and which used the LIFO inventory method for its last C
corporation tax year, must include the LIFO recapture amount in gross income
for the last taxable year for which it was a C corporation.
(b) Any amount included in gross income under
paragraph (a) shall be included in the value of inventory by making the
appropriate adjustments to basis.
(3) Payment of Tax. The tax attributable to the inclusion in income of the LIFO recapture amount is payable in four equal installments.
(a) The first installment must
be paid on or before the unextended due date for filing the C corporation
return for the last tax year before conversion to S corporation
status.
(b) The three remaining
installments are due on or before the unextended due dates of the corporation's
tax returns for the three succeeding tax years.
(c) No interest will be charged if the
installments are paid on or before their respective due dates.
Author: Ed Cutter, CPA
Statutory Authority: Act 89-837.
History: Filed July 22, 1992, October 30, 1992. Amended: Filed March 31, 2000, effective May 5, 2000.
Disclaimer: These regulations may not be the most recent version. Alabama may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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