Internal Revenue Code · 26 U.S.C.
§ 471. General rule for inventories
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 471
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Enacted
- October 4, 1976 by Pub. L. 94–455
- Last amended
- December 22, 2017 by Pub. L. 115–97
- Amendments
- 3 dated changes in the source credit
- Length
- 4 subsections · 506 words · about 2 min to read
- Defines
- 1 term
- Cross-references
- cites 4; cited by 4 Code sections and 28 other regulations
- Regulations
- 11 issued under this section
Whenever in the opinion of the Secretary the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer on such basis as the Secretary may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income.
For purposes of this subsection, the term “applicable financial statement” has the meaning given the term in section 451(b)(3).
In the case of any taxpayer which is not a corporation or a partnership, the gross receipts test of section 448(c) shall be applied in the same manner as if each trade or business of such taxpayer were a corporation or partnership.
Any change in method of accounting made pursuant to this subsection shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.
For rules relating to capitalization of direct and indirect costs of property, see section 263A.
(Aug. 16, 1954, ch. 736, 68A Stat. 159; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99–514, title VIII, § 803(b)(4), Oct. 22, 1986, 100 Stat. 2356; Pub. L. 105–34, title IX, § 961(a), Aug. 5, 1997, 111 Stat. 891; Pub. L. 115–97, title I, § 13102(c), Dec. 22, 2017, 131 Stat. 2103.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 471
- § 1.471-1 Need for inventories.
- § 1.471-2 Valuation of inventories.
- § 1.471-3 Inventories at cost.
- § 1.471-4 Inventories at cost or market, whichever is lower.
- § 1.471-5 Inventories by dealers in securities.
- § 1.471-6 Inventories of livestock raisers and other farmers.
- § 1.471-7 Inventories of miners and manufacturers.
- § 1.471-8 Inventories of retail merchants.
- § 1.471-9 Inventories of acquiring corporations.
- § 1.471-10 Applicability of long-term contract methods.
- § 1.471-11 Inventories of manufacturers.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 4 other sections
- § 448(a)(3) Limitation on use of cash method of accounting
- § 451(b)(3) General rule for taxable year of inclusion
- § 481 Adjustments required by changes in method of accounting
- § 263A Capitalization and inclusion in inventory costs of certain expenses
Cited by 4 Code sections
- § 170(e)(3)(C)(iv)(I) Charitable, etc., contributions and gifts
- § 312(n)(4)(B)(i) Effect on earnings and profits
- § 472(a) Last-in, first-out inventories
- § 1363(d)(3)(A) Effect of election on corporation
Cited in 28 regulations not issued under it
- § 1.56(g)-1 Adjusted current earnings.
- § 1.165-6 Farming losses.
- § 1.165-7 Casualty losses.
- § 1.165-8 Theft losses.
- § 1.199A-10 Allocation of cost of goods sold (COGS) and other deductions to domestic production gross receipts (DPGR), and other rules.
- § 1.263A-0 Outline of regulations under section 263A.
- § 1.263A-1 Uniform capitalization of costs.
- § 1.263A-2 Rules relating to property produced by the taxpayer.
- § 1.263A-3 Rules relating to property acquired for resale.
- § 1.263A-4 Rules for property produced in a farming business.
- § 1.263A-7 Changing a method of accounting under section 263A.
- § 1.312-4 Examples of adjustments provided in section 312(c).
- § 1.446-1 General rule for methods of accounting.
- § 1.451-3 Timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting.
- § 1.451-8 Advance payments for goods, services, and certain other items.
- § 1.472-1 Last-in, first-out inventories.
- § 1.472-6 Change from LIFO inventory method.
- § 1.475(c)-1 Definitions—dealer in securities.
- § 1.522-2 Manner of taxation of cooperative associations subject to section 522.
- § 1.611-2 Rules applicable to mines, oil and gas wells, and other natural deposits.
- § 1.631-1 Election to consider cutting as sale or exchange.
- § 1.751-1 Unrealized receivables and inventory items.
- § 1.936-5 Intangible property income when an election out is made: Product, business presence, and contract manufacturing.
- § 1.964-1 Determination of the earnings and profits of a foreign corporation.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
- Subtitle A Income Taxes
- Chapter 1 NORMAL TAXES AND SURTAXES
- Subchapter E Accounting Periods and Methods of Accounting
- Part II METHODS OF ACCOUNTING
- Subpart D Inventories
Nearby sections
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
Amendments
2017—Subsecs. (c), (d). Pub. L. 115–97 added subsec. (c) and redesignated former subsec. (c) as (d).
1997—Subsecs. (b), (c). Pub. L. 105–34 added subsec. (b) and redesignated former subsec. (b) as (c).
1986—Pub. L. 99–514 designated existing provisions as subsec. (a) and added subsec. (b).
1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 13102(e) of Pub. L. 115–97, set out as a note under section 263A of this title.
Effective Date of 1997 Amendment
Pub. L. 105–34, title IX, § 961(b)(1), Aug. 5, 1997, 111 Stat. 891, provided that: “The amendment made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1986 Amendment
If any interest costs incurred after Dec. 31, 1986, are attributable to costs incurred before Jan. 1, 1987, the amendment by Pub. L. 99–514 is applicable to such interest costs only to the extent such interest costs are attributable to costs which were required to be capitalized under section 263 of the Internal Revenue Code of 1954 and which would have been taken into account in applying section 189 of the Internal Revenue Code of 1954 (as in effect before its repeal by section 803 of Pub. L. 99–514) or, if applicable, section 266 of such Code, see section 7831(d)(2) of Pub. L. 101–239, set out as an Effective Date note under section 263A of this title.
Amendment by Pub. L. 99–514 applicable to costs incurred after Dec. 31, 1986, in taxable years ending after such date, except as otherwise provided, see section 803(d) of Pub. L. 99–514, set out as an Effective Date note under section 263A of this title.
Coordination With Section 481
Pub. L. 105–34, title IX, § 961(b)(2), Aug. 5, 1997, 111 Stat. 891, provided that:
“In the case of any taxpayer permitted by this section [amending this section and enacting provisions set out as a note above] to change its method of accounting to a permissible method for any taxable year—“(A) such changes shall be treated as initiated by the taxpayer,“(B) such changes shall be treated as made with the consent of the Secretary of the Treasury, and“(C) the period for taking into account the adjustments under section 481 [26 U.S.C. 481] by reason of such change shall be 4 years.”
Study of Accounting Methods for Inventory; Report Not Later Than December 31, 1982
Pub. L. 97–34, title II, § 238, Aug. 13, 1981, 95 Stat. 254, directed Secretary of the Treasury to conduct a study of methods of tax accounting for inventory with a view towards development of simplified methods and to report to Congress, not later than Dec. 31, 1982, prior to repeal by Pub. L. 100–647, title VI, § 6252(a)(2), Nov. 10, 1988, 102 Stat. 3752.