Publication 535 |
2001 Tax Year |
Capitalized Premiums
Under the uniform capitalization rules, you must capitalize the
direct costs and part of the indirect costs for certain production or
resale activities. You include these costs in the basis of property
you produce or acquire for resale rather than claiming them as a
current deduction. You recover the costs through depreciation,
amortization, or cost of goods sold when you use, sell, or otherwise
dispose of the property.
Indirect costs include premiums for insurance on your plant or
facility, machinery, equipment, materials, property produced, or
property acquired for resale.
Uniform capitalization rules.
You may be subject to the uniform capitalization rules if, in your
trade or business or an activity carried on for profit, you do any of
the following.
- Produce real property or tangible personal property for use
in the business or activity. For this purpose, tangible personal
property includes a film, sound recording, video tape, book, or
similar property.
- Produce real property or tangible personal property for sale
to customers.
- Acquire property for resale.
However, these rules do not apply to the following property.
- Personal property you acquire for resale if your average
annual gross receipts are $10 million or less for the 3 prior tax
years.
- Property you produce if you meet either of the following
conditions.
- Your indirect costs of producing the property are $200,000
or less.
- You treat inventoriable items as materials and supplies that
are not incidental. For more information, see Revenue Procedure
2001-10 in Internal Revenue Bulletin No. 2001-2.
More information.
For more information on these rules, see Uniform
Capitalization Rules in Publication 538
and the regulations
under Internal Revenue Code section 263A.
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