Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as nonincidental materials and elects to do so. In December of 2019, he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.
(a) In general -
(1) Non-incidental materials and supplies. Except as provided in paragraphs (d), (e), and (f) of this section, amounts paid to acquire or produce materials and supplies (as defined in paragraph (c) of this section) are deductible in the taxable year in which the materials and supplies are first used in the taxpayer's operations or are consumed in the taxpayer's operations.
(2) Incidental materials and supplies. Amounts paid to acquire or produce incidental materials and supplies (as defined in paragraph (c) of this section) that are carried on hand and for which no record of consumption is kept or of which physical inventories at the beginning and end of the taxable year are not taken, are deductible in the taxable year in which these amounts are paid, provided taxable income is clearly reflected.
(3) Use or consumption of rotable and temporary spare parts. Except as provided in paragraphs (d), (e), and (f) of this section, for purposes of paragraph (a)(1) of this section, rotable and temporary spare parts (defined under paragraph (c)(2) of this section) are first used in the taxpayer's operations or are consumed in the taxpayer's operations in the taxable year in which the taxpayer disposes of the parts.
(b) Coordination with other provisions of the Internal Revenue Code. Nothing in this section changes the treatment of any amount that is specifically provided for under any provision of the Internal Revenue Code (Code) or regulations other than section 162(a) or section 212 and the regulations under those sections. For example, see § 1.263(a)-3, which requires taxpayers to capitalize amounts paid to improve tangible property and section 263A and the regulations under section 263A, which require taxpayers to capitalize the direct and allocable indirect costs, including the cost of materials and supplies, of property produced by the taxpayer and property acquired for resale. See also § 1.471-1, which requires taxpayers to include in inventory certain materials and supplies.
Solved
Show answers
More tips
- P Photography and Videography How to Choose a Digital Camera?...
- C Computers and Internet How to Properly Order Clothing from International Online Stores...
- F Food and Cooking How to Calculate the Gender of Your Child with Blood?...
- S Society and Politics 10 Tips for Boosting Your Self-Esteem...
- C Computers and Internet How to Create a Folder on Your iPhone?...
- G Goods and services How to sew a ribbon: Tips for beginners...
- F Food and Cooking How to Make Mayonnaise at Home? Secrets of Homemade Mayonnaise...
- C Computers and Internet Which Phone is Best for Internet Surfing?...
- F Food and Cooking Everything You Need to Know About Pasta...
- C Computers and Internet How to Choose a Monitor?...
Answers on questions: Business
- B Business I sooooo pwwwtttttyyyy...
- B Business Damaris is a member of aasa. what did she most likely learn from a meeting she recently went to? a professional accountant would be coming to talk to group members about...
- B Business Gap and pottery barn are examples of where two or more retail outlets are owned and controlled by a corporation that employs central buying and merchandising and sells...
- B Business Which of the following options is not a unique feature of e-commerce technology? a. the consumer is a participant in the process of delivering products or services. b....
- B Business Maria works as a tutor for $10 an hour and as a waitress for $14 an hour. this month, she worked a combined total of 83 hours at her two jobs. let t be the number of hours...
- B Business What happens if the amount of uncollectible account expense is overstated at year end? a : net accounts receivable will be understated. b : allowance for doubtful accounts...
- E Engineering Three variables , x, y and z, supposedly hold strings of digits, suitable for converting to integers. write code that converts these to integers and print the sum of these...
- B Business It took megatech, inc. 100,000 labor-hours to produce the first of several oil-drilling rigs for antarctic exploration. your company, natural resources, inc., has agreed...
- M Mathematics (1 point) in 2012, the percentage of cell phone owners who used their cell phone to send or receive text messages was 80%80%. a polling firm contacted a simple random sample...
- E English How do plot events contribute to a story s theme...
Ответ: