Fall 2011 issue of Horizons

Impact on a Company Utilizing the LIFO Inventory Method Assume Company ABC, a calendar year-end Corporation, has a LIFO reserve of $10,000,000 as of December 31, 2012. If a tax proposal to eliminate LIFO is eventually passed, Company ABC must write up their inventory by $10,000,000 on January 1, 2013. For tax purposes they must increase taxable income by $1,000,000 for tax years 2013 through 2022. Assuming a 35% federal tax rate and a 6% state tax rate, Company ABC will incur approximately $410,000 of additional tax liability for tax years 2013 through 2022.

Opponents against repeal argue that LIFO provides a more accurate reflection of a taxpayer’s current income by matching current costs against current revenues. Other opponents argue an increase in taxes would force companies to eliminate jobs or restrict their ability to invest.

RubinBrown’s Manufacturing & Distribution Services Group RubinBrown’s Manufacturing & Distribution Services Group is nationally recognized for superior assurance, tax, and consulting expertise coupled with solid international business knowledge, exceptional inventory management and process improvement services.

Jim Mather - St. Louis Partner-In-Charge Manufacturing & Distribution Services Group jim.mather@rubinbrown.com 314.290.3470

Rick Feldt, CPA - St. Louis Partner Manufacturing & Distribution Services Group rick.feldt@rubinbrown.com 314.290.3220

Mike Lewis, CPA - St. Louis Partner Manufacturing & Distribution Services Group mike.lewis@rubinbrown.com 314.290.3391

Todd Pleimann, CPA - Kansas City Partner Manufacturing & Distribution Services Group Managing Partner, Kansas City Office todd.pleimann@rubinbrown.com 913.499.4411

Russ White, CPA - Denver Partner Manufacturing & Distribution Services Group russ.white@rubinbrown.com 303.952.1247

Nathan Croll, CPA—St. Louis Manager Manufacturing & Distribution Services Group nathan.croll@rubinbrown.com 314.290.3484

www.rubinbrown.com

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