Parts inventory & LIFO

[mbowers]

How common is the use of the last-in, first-out (LIFO) method for costing inventories in dealerships? I've heard that the IRS is turning its attention to parts departments, but I thought most dealers phased out of LIFO a couple of years ago.

[J.C. BOHL]

Last time I was Involved in the LIFO system was 1975 at a Ford dealership.

We were on a card system and were able to properly cost the parts as they arrived.

When we changed to Dcs mail-in pad system,we dropped LIFO The advantage, of course, is that the dealership pays less taxes on the parts inventory, but for the labor intensive time involved in maintaining the system, I do'nt think it is worth it.
I have not heard of any dealer still using it in the Phila Zone.

[mbowers]

Thanks. I was pretty sure most dealerships had gone off LIFO for costing the parts inventory based on some research we did 2 years ago. For anyone still on LIFO be aware that the IRS is taking a firm position against the practice. No fines or penalties so far. Dealers using LIFO for parts are being told to switch to an actual cost method.