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FOR IMMEDIATE RELEASE

Dealers Can Use Replacement Cost for Valuing Parts Inventories

A Major Victory for Mountain State Ford Truck Sales, Dealers in General ... and Common Sense, in Particular.

Revenue Procedure 2002-17 

April, 2002 --

—It's no April Fool's joke ... although it's more than an uncanny coincidence ... that on April 1st, the IRS is scheduled to include Revenue Procedure 2002-17 in Internal Revenue Bulletin 2002-13.

The IRS has announced that it will allow automobile dealers ... including new light, medium and/or heavy-duty truck dealers ... to value their parts inventories using the replacement cost method.  

The Service said it will allow dealers to approximate the cost of their vehicle parts inventories using a replacement cost method grounded in standard price lists.  

If dealers are currently under IRS audit exam and the use of replacement cost is an issue under consideration, the IRS will drop the issue.  

The Service indicated that it has given careful consideration to the "unique circumstances surrounding the use of replacement cost by automobile dealers ... Consideration of these factors has lead the Service to conclude that for reasons of administrative convenience, burden reduction and avoidance of further controversy in this area, a safe-harbor method of accounting to determine the cost of vehicle parts inventory using replacement cost to approximate actual cost should be provided to automobile dealers."

The entire industry stands in debt to Mountain State Ford Truck Sales, Inc., its owners and their families for what they have accomplished by their persistence and willingness to stand up against the IRS on this matter.

Readers of our publications, the LIFO Lookout and the Dealer Tax Watch, are well aware of our extraordinary involvement in this controversy with the IRS.  For articles on this subject which go back to the original Technical Advice Memo, see "Replacement Cost Method for Valuing Parts Inventories."

Mr. De Filipps testified as an expert witness in the Tax Court trial in Denver and basically all of the reasons he stressed in his expert witness opinion are recognized Rev. Proc. 2002-17 as "unique circumstances" justifying the use of replacement cost by dealers.  

Rev. Proc. 2002-17 was covered at length in the June 2002 issue of the LIFO Lookout.