- -30
to petitioner in petitioner's fiscal year 1990, as in effect a
concession by respondent of this amount, which is a little over
$6,000 in excess of the amount determined by respondent in the
notice of deficiency.
The next issue is to what extent, if any, the officers'
compensation paid by petitioner for its fiscal year 1990 should
be allocated to mixed service costs and capitalized pursuant to
section 263A. Although the deficiency notice merely determined
an increase in petitioner's ending inventory, respondent at trial
explained that this was due in part to capitalization under
section 263A of officers' salaries paid for production
activities.3
3 In Hamilton Indus., Inc. v. Commissioner, 97 T.C. 120,
143 n.10 (1991), which involved an inventory valuation issue, we
pointed out that:
For tax years beginning after Dec. 31, 1986, the full
absorption rules were replaced by the uniform capitalization
rules of sec. 263A, added to the Code by The Tax Reform Act
of 1986, supra, which expanded the types of indirect costs
required to be treated as inventory costs. See S. Rept.
99-313, 1986-3 C.B. (Vol. 3) 1, 133-152.
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