Inventory Simplification and Reform Tax Act of 1983

Inventory Simplification and Reform Tax Act of 1983 - Amends the Internal Revenue Code to eliminate the qualification requirement for the last-in first- out (LIFO) method of accounting that a taxpayer use no inventory method for financial reporting or credit purposes other than the LIFO method.

Allows a taxpayer who adopts the LIFO method to spread increases in taxable income attributable to such change over a ten-year period.

Increases from $2,000,000 to $8,000,000 the average annual gross receipts a small business which uses the LIFO method may receive over a three year period in order to qualify for the election to use one inventory pool for any trade or business. Permits a wholesaler or retailer who uses such method to elect the use of inventory pools based on applicable Government price index categories for all items of inventory. Allows the use of such index categories in the pricing of inventories under such dollar-value methods.

Allows an election to use a link chain or index method to compute the LIFO value of dollar-value pool without regard to suitability or practicality of any other method.

Limits the amount of the LIFO benefit which is subject to recapture to the extent price increases do not exceed the rate of inflation.

Allows an election by small businesses which are at least half-owned by active participants in the trade or business and which have average annual gross receipts of $2,000,000 or less for the three taxable years ending with the year of election to use the cash receipts and disbursements method of accounting without regard to any inventory requirements.

Permits a taxpayer to reduce the value of a portion of excess inventory items held for more than 12 months. Sets forth a schedule for such reductions.