Rev. Rul. 87-3

1987-1 C.B. 147, 1987-2 I.R.B. 5.

LIFO; PRICE INDEXES; DEPARTMENT STORES

Published: January 12, 1987

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

  LIFO; price indexes; department stores. The May 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, May 31, 1986.

  The following price indexes for May 1986 were issued by the Bureau of Labor Statistics on June 24, 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, May 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 unless otherwise noted)
                                                     Percentage
                                                     Change from
                               1985        1986      May 1986 [FN1]
________________________________________________________________________
  1. Piece Goods               393.4        401.1         2.0
  2. Domestics and Draperies   552.6        548.3        -0.8
  3. Women's and Children's
       Shoes                   554.1        533.0        -3.8
  4. Men's Shoes               713.8        730.0         2.3
  5. Infant's Wear             492.8        533.9         8.3
  6. Women's Underwear         438.2        427.8        -2.4
  7. Women's and Girl's
       Hosiery                 235.2        236.1         0.4
  8. Women's and Girl's
       Accessories             436.0        455.5         4.5
  9. Women's Outerwear and
       Girls' Wear             345.7        336.9        -2.5
10. Men's Clothing            472.5        475.8         0.7
11. Men's Furnishings         480.5        482.7         0.5
12. Boy's Clothing and
       Furnishings             438.0        440.8         0.6
13. Jewelry                   684.8        669.0        -2.3
14. Notions                   438.8        472.0        -2.4
15. Toilet Articles and
       Drugs                   635.4        661.6         4.1
16. Furniture and Bedding     534.4        543.4         1.7
17. Floor Coverings           462.8        467.7         1.1
18. Housewares                716.9        711.8        -0.7
19. Major Appliances          246.6        249.1         1.0
20. Radio and Television      105.2        100.3        -4.7
21. Recreation and Education   N/A         100.3         N/A
22. Home Improvements          N/A          97.5         N/A
23. Auto Accessories           N/A          99.5         N/A
     Groups 1-15: Soft Goods   478.3        478.6         0.1
     Groups 16-20: Durable
       Goods                   446.2        446.1         0.0
     Groups 21-23: Misc.
       Goods                    N/A          99.7         N/A
     Store Total               469.2        469.0         0.0

Rev. Rul. 87-3, 1987-1 C.B. 147, 1987-2 I.R.B. 5