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TaxNewsFlash-United States March 7, 2008
No. 2008-108 PRINTABLE VERSION HOME CONTACT US IRS Provides Vehicle-Pool Method for Use by Car and Truck Dealers and Wholesalers The IRS today released an advance copy of Rev. Proc. 2008-23 providing an alternative dollar-
value last-in, first-out (LIFO) pooling method — known as the Vehicle-Pool Method — for use by retail dealers and wholesale distributors of cars and light-duty trucks. Today ’ s guidance provides the exclusive procedures for obtaining automatic consent to change to the Vehicle-Pool Method, and updates earlier guidance to provide the permissible method of
pooling for crossover vehicles for resellers of cars and light-duty trucks that do not use the Vehicle-
Pool Method. Rev. Proc. 2008-23 is being issued under the IRS ’ s Industry Issue Resolution (IIR) program. For an electronic version of today ’ s guidance (12 pages): Rev. Proc. 2008-23 Overview In Fox Chevrolet, Inc. Maryland v. Commissioner, 76 T.C. 708 (1981), acq., 1984-2 C.B. 1, and
in Richardson Investments, Inc. v. Commissioner, 76 T.C. 736 (1981), the Tax Court rejected
automobile dealers ’ attempts to assign cars and trucks to a single “ transportation ” pool. Since those cases were decided, the IRS has recognized that the previous distinctions between
cars and light-duty trucks have diminished significantly. With the creation of “ crossover ” vehicles — some of which share characteristics of both cars and light-duty trucks (e.g., SUVs, minivans, and similar vehicles, formerly denoted as “ hybrid ” ) — the IRS has determined that any reseller of cars or light-duty trucks that is subject to the dollar-value LIFO pooling rules may use the
Vehicle-Pool Method. Also, any reseller of cars or light duty trucks that has crossover vehicles and that uses the
Alternative LIFO Method or the Used Vehicle Alternative LIFO Method must use the method of
pooling for crossover vehicles under Rev. Proc. 97-36 or Rev. Proc. 2001-23, if the reseller
does not choose to use the Vehicle-Pool Method. The Vehicle-Pool Method allows a reseller with new vehicles (i.e., new cars, new light-duty
trucks, and new crossover vehicles, including SUVs, vans, minivans, and other similar vehicles)
to establish a New Vehicle pool for all new vehicles. In addition, a reseller with used vehicles (i.
e., used cars, used light-duty trucks, and used crossover vehicles, including SUVs, vans,
minivans, and other similar vehicles) may establish a Used Vehicle pool for all used vehicles.
No vehicle with a gross vehicle weight that exceeds 14,000 pounds can be included in this pool. http://www.us.kpmg.com/microsite/taxnewsflash/2008/Mar/08108.html (1 of 3) [3/7/2008 3:57:39 PM] TaxNewsFlash-United States Consent to Change Method of Accounting ? A LIFO reseller is granted the Commissioner ’ s consent to change to the Vehicle-Pool Method, pursuant to Rev. Proc. 2002-9, provided that the reseller follows the provisions of Rev. Proc.
2002-9 (with the certain modifications). ? A LIFO reseller that also at the same time changes to the Alternative LIFO Method (under Rev.
Proc. 97-36) or the Used Vehicle Alternative LIFO Method (under Rev. Proc. 2001-23) can file a
single Form 3115, Application for Change in Accounting Method, for both changes and enter
both designated numbers on its Form 3115. For example, a reseller concurrently changing to the
Alternative LIFO Method and the Vehicle-Pool Method would enter both “ 58 and 112 ” on its Form 3115. ? A LIFO reseller using the Alternative LIFO Method or the Used Vehicle Alternative LIFO Method
and that wants to change to the Vehicle-Pool Method must follow the procedures under Rev.
Proc. 97-27 (as modified). A LIFO reseller that changes its pooling method must make the change on a cut-off basis and
comply with Reg. section 1.472-8(g). Instead of using the earliest tax year for which the reseller
adopted the LIFO method for any items in a pool, the reseller must use the year of change as the
base year when determining the LIFO value of that pool for the year of change and subsequent tax
years. The reseller must restate the base-year cost of all layers of increment in a pool at the
beginning of the year of change in terms of new base-year cost. Audit Protection A reseller ’ s use of the Vehicle-Pool Method on a federal income tax return filed before March 7, 2008, will not be raised as an issue by the IRS. In addition, if a reseller ’ s use of the Vehicle-Pool Method before March 7, 2008, is an issue under consideration in an examination, before IRS
Appeals or the Tax Court, the issue will not be further pursued by the IRS. The audit protection
extends only to the question of whether the reseller has established the appropriate number of
pools. This does not block the IRS from raising or pursuing other inventory-related issues in an
examination, in Appeals and before the Tax Court. In general, Rev. Proc. 2008-23 is effective for tax years ending on or after December 31, 2007;
however, certain provisions, including those relating to audit protection are effective for tax
years ending on or after March 7, 2008. Rev. Proc. 2008-23 will appear in Internal Revenue Bulletin 2008-12, dated March 24, 2008. http://www.us.kpmg.com/microsite/taxnewsflash/2008/Mar/08108.html (2 of 3) [3/7/2008 3:57:39 PM] TaxNewsFlash-United States ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND
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