- 5 - Deductions are a matter of legislative grace, and taxpayers bear the burden of proving the entitlement to any deduction claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Section 162(a) allows a deduction for a taxpayer’s “ordinary and necessary” business expenses paid or incurred during the taxable year. However, deductions allowed under section 162(a) are also “subject to the exceptions provided in part IX (sec. 261 and following, relating to items not deductible).” Sec. 161. The uniform capitalization rules of section 263A(a)(1) require that all direct costs and certain indirect costs allocable to certain property be included in inventory, or capitalized if such property is not inventory. Taxpayers subject to section 263A must capitalize all direct costs and certain indirect costs properly allocable to property produced or property acquired for resale. Sec. 1.263A-1(e)(1), Income Tax Regs. “Direct costs”, as they are relevant to “producers”, include “direct material costs and direct labor costs.” Sec. 1.263A-1(e)(2)(i), Income Tax Regs. “Direct material costs” include the costs of those materials that become an integral part of specific property produced and those materials that are consumed in the ordinary course of production and that can be identified or associated with particular units or groups of units of property produced. Sec. 1.263A-1(e)(2)(i)(A), Income TaxPage: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011