liquidation of LIFO layer

The reduction in inventory quantities resulting in the removal of older layers. With continuously higher costs, the older layers will have had the old, low costs under LIFO. Removing these old, low costs will cause an increase in profits and in taxable income. Therefore, it is important to be intentionally removing those old, low costs since this is likely to create an income tax payment that could have been avoided by not liquidating the old costs.