IRS Issues PLR Concluding Hedge Accounting Does Not Violate LIFO Conformity If Separate

The IRS has issued a private letter ruling on I.R.C. §472 and Treas. Reg. §1.472 confirming that an S corporation’s use of fair value hedge accounting for sales hedges on gasoline inventory, including recognition of unrealized gains or losses related to changes in sales prices of the underlying hedged assets, does not violate the last-in, first-out (LIFO) conformity requirement where the hedge accounting adjustment to the balance sheet inventory account remains separate from the LIFO inventory account and does not affect LIFO cost of sales calculations or earnings computations. [PLR 202625005]

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