Golden Gate Litho - Page 16

                                       - 16 -                                         

               of such values shall be taken as the inventory value                   
               of the article.                                                        
               Section 1.471-3, Income Tax Regs., defines "cost" as                   
          follows:                                                                    
                    (a) In the case of merchandise on hand at the                     
               beginning of the taxable year, the inventory price of                  
               such goods.                                                            
                              *   *   *   *   *   *   *                               
                    (c) In the case of merchandise produced by the                    
               taxpayer since the beginning of the taxable year, (1)                  
               the cost of raw materials and supplies entering into                   
               or consumed in connection with the product, (2)                        
               expenditures for direct labor, and (3) indirect                        
               production costs incident to and necessary for the                     
               production of the particular article, including in                     
               such indirect production costs an appropriate portion                  
               of management expenses, but not including any cost of                  
               selling or return on capital, whether by way of                        
               interest or profit.  See section 1.263A-1T for more                    
               specific rules regarding the treatment of production                   
               costs. * * *                                                           
               The uniform capitalization rules of section 263A apply to              
          real or tangible property produced by the taxpayer.5  Sec.                  
          263A(b)(1).  Section 263A(a) provides that inventory costs                  
          include the direct costs of such property and such property's               
          proper share of those indirect costs part or all of which are               
          allocable to such property.  Section 1.263A-1T, Temporary                   




               5  Sec. 263A also applies to real or personal property                 
          described in sec. 1221(1) which is acquired by the taxpayer for             
          resale except for taxpayers who have annual gross receipts of $10           
          million or less.  Sec. 263A(b)(2).  There is no exception                   
          provided for producers who have annual gross receipts of $10                
          million or less.                                                            



Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011