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What type of business would use LIFO?


I know what the inventroy methods are but i'm trying to figure out what type of business would use LIFO. Supermarkests use FIFO, car dealerships use Specific Cost, and businesses that sell similar items use Average Cost. But what business uses LIFO?

538 day(s) ago

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alohachris 		Most companies that want to reduce their profits in a inflationary market. Oil companies use LIFO because they know that oil was rising and they wanted to show less profit to keep people from being upset with huge profits. Most utilities use LIFO.

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DougCPA 		FIFO and LIFO are not required to be used based on the actual flow of inventory. In your example, Supermarkets would attempt to sell in a first-in, first-out manner in order to keep the stock fresh, but it is perfectly fine to use LIFO to keep income taxes lower or reflect the increases in product costs.

I would think that the mining industry would use LIFO. Based on your question, you are looking at the actual flow of inventory. Gravel, coal, diamonds, etc. are piled up with the newest inventory being placed on top of the stack, and shipped out from the top down.

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noamnoam 		I use modified LIFO in my taxable investing accounts.

IRS has different tax rules for short term vs. long term gains and losses

Losses:
When selling at a loss, I really want to sell with short term losses (they deduct against income) 25%
Long term losses only count against long term gains 15%.
So, would you rather save 25% or 15%?

On gains, I say modified LIFO.
Held less than a year, you get taxed like income 25%.
Long term gains are taxed at 15%.
Because stocks generally go up over time, the oldest stocks I own have larger gains than my younger ones.

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noamnoam 		Businesses who use LIFO are trying to reduce their profits and therefore reduce their tax bill.

In some countries it is illegal (I am from New Zealand and it is not allowed here).

Wikipedia explains it:
http://en.wikipedia.org/wiki/FIFO_and_LIFO_accounting

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