Rev. Rul. 87-12

1987-1 C.B. 150, 1987-5 I.R.B. 5.

LIFO; PRICE INDEXES; DEPARTMENT STORES

Published: February 2, 1987

Section 472.-Last-in, First-out Inventories, 26 CFR 1.472-1: Last-in, first-out inventories

  LIFO; price indexes; department stores. The August 1986 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, August 31, 1986.

  The following price indexes for August 1986 were issued by the Bureau of Labor Statistics on September 25, 1986, for use by department stores, and are accepted by the Internal Revenue Service, under section 1.472-1(k) of the Income Tax Regulations and Rev. Proc. 72-21, 1972-1 C.B. 745, for appropriate application to inventories of department stores employing the retail inventory and last-in, first- out inventory methods for tax years ended on, or with reference to, August 31, 1986.

  Indexes are prepared on a national basis for the store total, for 23 major groups of departments, and for three special combinations-soft goods, durable goods and miscellaneous goods. The store total index covers all departments, including some not listed separately, with the following exceptions: candy, foods, liquor, tobacco, as well as contract departments.

  The major groups of departments for which indexes are prepared have been expanded from 20 to 23. These new groups are: (1) Group 21-Recreation and Education; (2) Group 22-Home Improvements; and (3) Group 23-Auto Accessories. A Miscellaneous Goods index is also introduced to reflect the aggregate movement of these three new groups. See Rev. Proc. 86-46, 1986-50 I.R.B. 6.

  Although the new indexes were introduced in the February 1986 Department Store Inventory Price Indexes, January 1987 will be the first month for which there will be a percent change based on a 12- month period. The January 1986 indexes for the new groups are all 100. Rev. Proc. 86-46 modifies and supersedes Rev. Proc. 72-21.

  Rev. Proc. 86-47, 1986-50 I.R.B. 8, sets forth the procedures required of taxpayers to change their method of accounting from that of using the 20 groups set forth in Rev. Proc. 72-21 to the method of using the 23 groups set forth in Rev. Proc. 86-46.

                 BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
                 INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
                             (January 1941 = 100)
-------------------------------------------------------------------------------
                                                                    Percentage
                                                                    Change from
                                            August       August     August 1985
                                             1985         1986        to August
                                                                     1986 [FN1]
-------------------------------------------------------------------------------
    1.  Piece Goods ........................... 393.6        409.0          3.9
    2.  Domestics and Draperies ............... 538.7        545.3          1.2
    3.  Women's and Children's Shoes .......... 539.0        522.2         -3.1
    4.  Men's Shoes ........................... 712.6        729.7          2.4
    5.  Infants' Wear ......................... 493.3        528.3          7.1
    6.  Women's Underwear ..................... 432.7        433.3          0.1
    7.  Women's and Girls' Hosiery ............ 235.2        237.5          1.0
    8.  Women's and Girls' Accessories ........ 448.1        448.5          0.1
    9.  Women's Outerwear and Girls'
          Wear ................................ 338.1        337.4         -0.2
   10.  Men's Clothing ........................ 469.9        471.3          0.3
   11.  Men's Furnishings ..................... 478.6        478.3         -0.1
   12.  Boys' Clothing and Furnishings ........ 438.7        431.9         -1.6
   13.  Jewelry ............................... 692.1        694.0          0.3
   14.  Notions ............................... 487.4        441.1         -9.5
   15.  Toilet Articles and Drugs ............. 643.6        664.4          3.2
   16.  Furniture and Bedding ................. 534.5        542.2          1.4
   17.  Floor Coverings ....................... 461.6        465.8          0.9
   18.  Housewares ............................ 719.7        718.6         -0.2
   19.  Major Appliances ...................... 244.0        251.6          3.1
   20.  Radio and Television .................. 103.3         98.9         -4.3
   21.  Recreation and Education ................ N/A        100.3          N/A
   22.  Home Improvements ....................... N/A         99.1          N/A
   23.  Auto Accessories ........................ N/A         99.4          N/A
        Groups 1-15: Soft Goods ............... 474.8        477.6          0.6
        Groups 16-20: Durable Goods ........... 445.7        447.1          0.3
        Groups 21-23: Misc. Goods ............... N/A         99.9          N/A
        Store Total ........................... 467.0        468.9          0.4
FN1. Absence of a minus sign before percentage change in this column signifies
  price increase.

Rev. Rul. 87-12, 1987-1 C.B. 150, 1987-5 I.R.B. 5