IRS Proposes Changes To Retail Inventory Method Of Accounting

The Treasury Department has proposed certain changes to the retail inventory method (RIM) pursuant to the regulations under I.R.C. § 471. Treasury has solicited comments on proposed changes to Treas. Reg. §1.471-8, which would alter the manner in which the cost complement under Treas. Reg. § 1.471-8 has historically been calculated. Specifically, the proposed changes to the regulation would exclude sales-based vendor allowances, including discounts and price allowances, from the numerator of the cost complement calculation. This change, in essence, would increase the valuation of ending inventory in the cost of goods sold computation under the RIM and thereby reduce, for federal tax accounting purposes, the cost of goods sold deduction for many retailers.