Internal Revenue Code:Sec. 263A. Capitalization and inclusion in inventory costs of certain expenses
From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Contents |
Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IX - ITEMS NOT DEDUCTIBLE
Statute
Sec. 263A. Capitalization and inclusion in inventory costs of
certain expenses
(a) Nondeductibility of certain direct and indirect costs
(1) In general
In the case of any property to which this section applies, any
costs described in paragraph (2) -
(A) in the case of property which is inventory in the hands
of the taxpayer, shall be included in inventory costs, and
(B) in the case of any other property, shall be capitalized.
(2) Allocable costs
The costs described in this paragraph with respect to any
property are -
(A) the direct costs of such property, and
(B) such property's proper share of those indirect costs
(including taxes) part or all of which are allocable to such
property.
Any cost which (but for this subsection) could not be taken into
account in computing taxable income for any taxable year shall
not be treated as a cost described in this paragraph.
(b) Property to which section applies
Except as otherwise provided in this section, this section shall
apply to -
(1) Property produced by taxpayer
Real or tangible personal property produced by the taxpayer.
(2) Property acquired for resale
(A) In general
Real or personal property described in section 1221(a)(1)
which is acquired by the taxpayer for resale.
(B) Exception for taxpayer with gross receipts of $10,000,000
or less
Subparagraph (A) shall not apply to any personal property
acquired during any taxable year by the taxpayer for resale if
the average annual gross receipts of the taxpayer (or any
predecessor) for the 3-taxable year period ending with the
taxable year preceding such taxable year do not exceed
$10,000,000.
(C) Aggregation rules, etc.
For purposes of subparagraph (B), rules similar to the rules
of paragraphs (2) and (3) of section 448(c) shall apply.
For purposes of paragraph (1), the term ''tangible personal
property'' shall include a film, sound recording, video tape, book,
or similar property.
(c) General exceptions
(1) Personal use property
This section shall not apply to any property produced by the
taxpayer for use by the taxpayer other than in a trade or
business or an activity conducted for profit.
(2) Research and experimental expenditures
This section shall not apply to any amount allowable as a
deduction under section 174.
(3) Certain development and other costs of oil and gas wells or
other mineral property
This section shall not apply to any cost allowable as a
deduction under section 167(h), 179B, 263(c), 263(i), 291(b)(2),
616, or 617.
(4) Coordination with long-term contract rules
This section shall not apply to any property produced by the
taxpayer pursuant to a long-term contract.
(5) Timber and certain ornamental trees
This section shall not apply to -
(A) trees raised, harvested, or grown by the taxpayer other
than trees described in clause (ii) of subsection (e)(4)(B)
(after application of the last sentence thereof), and
(B) any real property underlying such trees.
(6) Coordination with section 59(e)
Paragraphs (2) and (3) shall apply to any amount allowable as a
deduction under section 59(e) for qualified expenditures
described in subparagraphs (B), (C), (D), and (E) of paragraph
(2) thereof.
(d) Exception for farming businesses
(1) Section not to apply to certain property
(A) In general
This section shall not apply to any of the following which is
produced by the taxpayer in a farming business:
(i) Any animal.
(ii) Any plant which has a preproductive period of 2 years
or less.
(B) Exception for taxpayers required to use accrual method
Subparagraph (A) shall not apply to any corporation,
partnership, or tax shelter required to use an accrual method
of accounting under section 447 or 448(a)(3).
(2) Treatment of certain plants lost by reason of casualty
(A) In general
If plants bearing an edible crop for human consumption were
lost or damaged (while in the hands of the taxpayer) by reason
of freezing temperatures, disease, drought, pests, or casualty,
this section shall not apply to any costs of the taxpayer of
replanting plants bearing the same type of crop (whether on the
same parcel of land on which such lost or damaged plants were
located or any other parcel of land of the same acreage in the
United States).
(B) Special rule for person with minority interest who
materially participates
Subparagraph (A) shall apply to amounts paid or incurred by a
person (other than the taxpayer described in subparagraph (A))
if -
(i) the taxpayer described in subparagraph (A) has an
equity interest of more than 50 percent in the plants
described in subparagraph (A) at all times during the taxable
year in which such amounts were paid or incurred, and
(ii) such other person holds any part of the remaining
equity interest and materially participates in the planting,
maintenance, cultivation, or development of such the plants
described in subparagraph (A) during the taxable year in
which such amounts were paid or incurred.
The determination of whether an individual materially
participates in any activity shall be made in a manner similar
to the manner in which such determination is made under section
2032A(e)(6).
(3) Election to have this section not apply
(A) In general
If a taxpayer makes an election under this paragraph, this
section shall not apply to any plant produced in any farming
business carried on by such taxpayer.
(B) Certain persons not eligible
No election may be made under this paragraph by a
corporation, partnership, or tax shelter, if such corporation,
partnership, or tax shelter is required to use an accrual
method of accounting under section 447 or 448(a)(3).
(C) Special rule for citrus and almond growers
An election under this paragraph shall not apply with respect
to any item which is attributable to the planting, cultivation,
maintenance, or development of any citrus or almond grove (or
part thereof) and which is incurred before the close of the 4th
taxable year beginning with the taxable year in which the trees
were planted. For purposes of the preceding sentence, the
portion of a citrus or almond grove planted in 1 taxable year
shall be treated separately from the portion of such grove
planted in another taxable year.
(D) Election
Unless the Secretary otherwise consents, an election under
this paragraph may be made only for the taxpayer's 1st taxable
year which begins after December 31, 1986, and during which the
taxpayer engages in a farming business. Any such election,
once made, may be revoked only with the consent of the
Secretary.
(e) Definitions and special rules for purposes of subsection (d)
(1) Recapture of expensed amounts on disposition
(A) In general
In the case of any plant with respect to which amounts would
have been capitalized under subsection (a) but for an election
under subsection (d)(3) -
(i) such plant (if not otherwise section 1245 property)
shall be treated as section 1245 property, and
(ii) for purposes of section 1245, the recapture amount
shall be treated as a deduction allowed for depreciation with
respect to such property.
(B) Recapture amount
For purposes of subparagraph (A), the term ''recapture
amount'' means any amount allowable as a deduction to the
taxpayer which, but for an election under subsection (d)(3),
would have been capitalized with respect to the plant.
(2) Effects of election on depreciation
(A) In general
If the taxpayer (or any related person) makes an election
under subsection (d)(3), the provisions of section 168(g)(2)
(relating to alternative depreciation) shall apply to all
property of the taxpayer used predominantly in the farming
business and placed in service in any taxable year during which
any such election is in effect.
(B) Related person
For purposes of subparagraph (A), the term ''related person''
means -
(i) the taxpayer and members of the taxpayer's family,
(ii) any corporation (including an S corporation) if 50
percent or more (in value) of the stock of such corporation
is owned (directly or through the application of section 318)
by the taxpayer or members of the taxpayer's family,
(iii) a corporation and any other corporation which is a
member of the same controlled group described in section
1563(a)(1), and
(iv) any partnership if 50 percent or more (in value) of
the interests in such partnership is owned directly or
indirectly by the taxpayer or members of the taxpayer's
family.
(C) Members of family
For purposes of this paragraph, the term ''family'' means the
taxpayer, the spouse of the taxpayer, and any of their children
who have not attained age 18 before the close of the taxable
year.
(3) Preproductive period
(A) In general
For purposes of this section, the term ''preproductive
period'' means -
(i) in the case of a plant which will have more than 1 crop
or yield, the period before the 1st marketable crop or yield
from such plant, or
(ii) in the case of any other plant, the period before such
plant is reasonably expected to be disposed of.
For purposes of this subparagraph, use by the taxpayer in a
farming business of any supply produced in such business shall
be treated as a disposition.
(B) Rule for determining period
In the case of a plant grown in commercial quantities in the
United States, the preproductive period for such plant if grown
in the United States shall be based on the nationwide weighted
average preproductive period for such plant.
(4) Farming business
For purposes of this section -
(A) In general
The term ''farming business'' means the trade or business of
farming.
(B) Certain trades and businesses included
The term ''farming business'' shall include the trade or
business of -
(i) operating a nursery or sod farm, or
(ii) the raising or harvesting of trees bearing fruit,
nuts, or other crops, or ornamental trees.
For purposes of clause (ii), an evergreen tree which is more
than 6 years old at the time severed from the roots shall not
be treated as an ornamental tree.
(5) Certain inventory valuation methods permitted
The Secretary shall by regulations permit the taxpayer to use
reasonable inventory valuation methods to compute the amount
required to be capitalized under subsection (a) in the case of
any plant.
(f) Special rules for allocation of interest to property produced
by the taxpayer
(1) Interest capitalized only in certain cases
Subsection (a) shall only apply to interest costs which are -
(A) paid or incurred during the production period, and
(B) allocable to property which is described in subsection
(b)(1) and which has -
(i) a long useful life,
(ii) an estimated production period exceeding 2 years, or
(iii) an estimated production period exceeding 1 year and a
cost exceeding $1,000,000.
(2) Allocation rules
(A) In general
In determining the amount of interest required to be
capitalized under subsection (a) with respect to any property -
(i) interest on any indebtedness directly attributable to
production expenditures with respect to such property shall
be assigned to such property, and
(ii) interest on any other indebtedness shall be assigned
to such property to the extent that the taxpayer's interest
costs could have been reduced if production expenditures (not
attributable to indebtedness described in clause (i)) had not
been incurred.
(B) Exception for qualified residence interest
Subparagraph (A) shall not apply to any qualified residence
interest (within the meaning of section 163(h)).
(C) Special rule for flow-through entities
Except as provided in regulations, in the case of any
flow-through entity, this paragraph shall be applied first at
the entity level and then at the beneficiary level.
(3) Interest relating to property used to produce property
This subsection shall apply to any interest on indebtedness
allocable (as determined under paragraph (2)) to property used to
produce property to which this subsection applies to the extent
such interest is allocable (as so determined) to the produced
property.
(4) Definitions
For purposes of this subsection -
(A) Long useful life
Property has a long useful life if such property is -
(i) real property, or
(ii) property with a class life of 20 years or more (as
determined under section 168).
(B) Production period
The term ''production period'' means, when used with respect
to any property, the period -
(i) beginning on the date on which production of the
property begins, and
(ii) ending on the date on which the property is ready to
be placed in service or is ready to be held for sale.
(C) Production expenditures
The term ''production expenditures'' means the costs (whether
or not incurred during the production period) required to be
capitalized under subsection (a) with respect to the property.
(g) Production
For purposes of this section -
(1) In general
The term ''produce'' includes construct, build, install,
manufacture, develop, or improve.
(2) Treatment of property produced under contract for the
taxpayer
The taxpayer shall be treated as producing any property
produced for the taxpayer under a contract with the taxpayer;
except that only costs paid or incurred by the taxpayer (whether
under such contract or otherwise) shall be taken into account in
applying subsection (a) to the taxpayer.
(h) Exemption for free lance authors, photographers, and artists
(1) In general
Nothing in this section shall require the capitalization of any
qualified creative expense.
(2) Qualified creative expense
For purposes of this subsection, the term ''qualified creative
expense'' means any expense -
(A) which is paid or incurred by an individual in the trade
or business of such individual (other than as an employee) of
being a writer, photographer, or artist, and
(B) which, without regard to this section, would be allowable
as a deduction for the taxable year.
Such term does not include any expense related to printing,
photographic plates, motion picture films, video tapes, or
similar items.
(3) Definitions
For purposes of this subsection -
(A) Writer
The term ''writer'' means any individual if the personal
efforts of such individual create (or may reasonably be
expected to create) a literary manuscript, musical composition
(including any accompanying words), or dance score.
(B) Photographer
The term ''photographer'' means any individual if the
personal efforts of such individual create (or may reasonably
be expected to create) a photograph or photographic negative or
transparency.
(C) Artist
(i) In general
The term ''artist'' means any individual if the personal
efforts of such individual create (or may reasonably be
expected to create) a picture, painting, sculpture, statue,
etching, drawing, cartoon, graphic design, or original print
edition.
(ii) Criteria
In determining whether any expense is paid or incurred in
the trade or business of being an artist, the following
criteria shall be taken into account:
(I) The originality and uniqueness of the item created
(or to be created).
(II) The predominance of aesthetic value over utilitarian
value of the item created (or to be created).
(D) Treatment of certain corporations
(i) In general
If -
(I) substantially all of the stock of a corporation is
owned by a qualified employee-owner and members of his
family (as defined in section 267(c)(4)), and
(II) the principal activity of such corporation is
performance of personal services directly related to the
activities of the qualified employee-owner and such
services are substantially performed by the qualified
employee-owner,
this subsection shall apply to any expense of such corporation
which directly relates to the activities of such
employee-owner in the same manner as if such expense were
incurred by such employee-owner.
(ii) Qualified employee-owner
For purposes of this subparagraph, the term ''qualified
employee-owner'' means any individual who is an
employee-owner of the corporation (as defined in section
269A(b)(2)) and who is a writer, photographer, or artist.
(i) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section,
including -
(1) regulations to prevent the use of related parties,
pass-thru entities, or intermediaries to avoid the application of
this section, and
(2) regulations providing for simplified procedures for the
application of this section in the case of property described in
subsection (b)(2).
Sources
(Added Pub. L. 99-514, title VIII, Sec. 803(a), Oct. 22, 1986, 100
Stat. 2350; amended Pub. L. 100-647, title I, Sec. 1008(b)(1)-(4),
title VI, Sec. 6026(a)-(c), Nov. 10, 1988, 102 Stat. 3437, 3438,
3691-3693; Pub. L. 101-239, title VII, Sec. 7816(d)(1), Dec. 19,
1989, 103 Stat. 2420; Pub. L. 106-170, title V, Sec. 532(c)(2)(B),
Dec. 17, 1999, 113 Stat. 1930.
Miscellaneous
AMENDMENTS
2005 - Energy Policy Act of 2005. Section 263A(c)(3) is amended by
inserting a eference to section 167(h). Effective Date- The
amendments made by this section shall apply to amounts paid or
incurred in taxable years beginning after the date of the enactment
of this Act.
2004 - Pub. L. 108-357, Sec. 338(b)(2). Section 263A(c)(3) is amended
by inserting ``179B,'' after ``section''.
1999 - Subsec. (b)(2)(A). Pub. L. 106-170 substituted
''1221(a)(1)'' for ''1221(1)''.
1989 - Subsec. (h)(3)(D). Pub. L. 101-239 substituted
''corporations'' for ''personal service corporations'' in heading
and amended text generally. Prior to amendment, text read as
follows:
''(i) In general. - In the case of a personal service
corporation, this subsection shall apply to any expense of such
corporation which directly relates to the activities of the
qualified employee-owner in the same manner as if such expense were
incurred by such employee-owner.
''(ii) Qualified employee-owner. - The term 'qualified
employee-owner' means any individual who is an employee-owner of
the personal service corporation and who is a writer, photographer,
or artist, but only if substantially all of the stock of such
corporation is owned by such individual and members of his family
(as defined in section 267(c)(4)).
''(iii) Personal service corporation. - For purposes of this
subparagraph, the term 'personal service corporation' means any
personal service corporation (as defined in section 269A(b)).''
1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1008(b)(1), inserted
at end ''Any cost which (but for this subsection) could not be
taken into account in computing taxable income for any taxable year
shall not be treated as a cost described in this paragraph.''
Subsec. (c)(3). Pub. L. 100-647, Sec. 1008(b)(2)(A), substituted
''section 263(c), 263(i), 291(b)(2), 616, or 617'' for ''section
263(c), 616(a), or 617(a)''.
Subsec. (c)(6). Pub. L. 100-647, Sec. 1008(b)(2)(B), added par.
(6).
Subsec. (d)(1). Pub. L. 100-647, Sec. 6026(b)(2)(A), substituted
''Section not to apply to certain property'' for ''Section to apply
only if preproductive period is more than 2 years'' in heading.
Subsec. (d)(1)(A). Pub. L. 100-647, Sec. 6026(b)(1), amended
subpar. (A) generally. Prior to amendment, subpar. (A) read as
follows: ''This section shall not apply to any plant or animal
which is produced by the taxpayer in a farming business and which
has a preproductive period of 2 years or less.''
Subsec. (d)(2)(B)(i). Pub. L. 100-647, Sec. 1008(b)(3)(A),
substituted ''the plants described in subparagraph (A) at all times
during the taxable year in which such amounts were paid or
incurred'' for ''such grove, orchard, or vineyard''.
Subsec. (d)(2)(B)(ii). Pub. L. 100-647, Sec. 1008(b)(3)(B),
substituted ''the plants described in subparagraph (A) during the
taxable year in which such amounts were paid or incurred'' for
''such grove, orchard, or vineyard during the 4-taxable year period
beginning with the taxable year in which the grove, orchard, or
vineyard was lost or damaged''.
Subsec. (d)(3)(A). Pub. L. 100-647, Sec. 6026(b)(2)(B), struck
out ''or animal'' after ''plant''.
Subsec. (d)(3)(B). Pub. L. 100-647, Sec. 6026(c), amended subpar.
(B) generally. Prior to amendment, subpar. (B) read as follows:
''No election may be made under this paragraph -
''(i) by a corporation, partnership, or tax shelter, if such
corporation, partnership, or tax shelter is required to use an
accrual method of accounting under section 447 or 448(a)(3), or
''(ii) with respect to the planting, cultivation, maintenance,
or development of pistachio trees.''
Subsec. (e). Pub. L. 100-647, Sec. 6026(b)(2)(B), struck out ''or
animal'' after ''plant'' wherever appearing in pars. (1), (3), and
(5).
Subsec. (f)(3). Pub. L. 100-647, Sec. 1008(b)(4), substituted
''allocable (as determined under paragraph (2)) to'' for ''incurred
or continued in connection with'' and inserted ''(as so
determined)'' after ''allocable''.
Subsecs. (h), (i). Pub. L. 100-647, Sec. 6026(a), added subsec.
(h) and redesignated former subsec. (h) as (i).
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to any instrument held,
acquired, or entered into, any transaction entered into, and
supplies held or acquired on or after Dec. 17, 1999, see section
532(d) of Pub. L. 106-170, set out as a note under section 170 of
this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1008(b)(1)-(4) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 6026(d) of Pub. L. 100-647, as amended by Pub. L.
101-239, title VII, Sec. 7816(d)(2), Dec. 19, 1989, 103 Stat. 2421,
provided that:
''(1) In general. - Except as otherwise provided in this
paragraph, the amendments made by this section (amending this
section) shall take effect as if included in the amendments made by
section 803 of the Tax Reform Act of 1986 (section 803 of Pub. L.
99-514).
''(2) Subsection (b). -
''(A) In general. - The amendments made by subsection (b)
(amending this section) shall apply to costs incurred after
December 31, 1988, in taxable years ending after such date.
''(B) Revocation of election. - If a taxpayer engaged in a
farming business involving the production of animals having a
preproductive period of more than 2 years made an election under
section 263A(d)(3) of the 1986 Code for a taxable year beginning
before January 1, 1989, such taxpayer may, without the consent of
the Secretary of the Treasury or his delegate, revoke such
election effective for the taxpayer's 1st taxable year beginning
after December 31, 1988.''
EFFECTIVE DATE
Section 7831(d)(2) of Pub. L. 101-239 provided that: ''If any
interest costs incurred after December 31, 1986, are attributable
to costs incurred before January 1, 1987, the amendments made by
section 803 of the Tax Reform Act of 1986 (section 803 of Pub. L.
99-514, enacting this section, amending sections 48, 267, 312, 447,
464, and 471 of this title, and repealing sections 189, 278, and
280 of this title) shall apply to such interest costs only to the
extent such interest costs are attributable to costs which were
required to be capitalized under section 263 of the Internal
Revenue Code of 1954 and which would have been taken into account
in applying section 189 of the Internal Revenue Code of 1954 (as in
effect before its repeal by section 803 of the Tax Reform Act of
1986) or, if applicable, section 266 of such Code.''
Section 803(d) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1008(b)(7), Nov. 10, 1988, 102 Stat. 3438; Pub. L.
101-239, title VII, Sec. 7831(d)(1), Dec. 19, 1989, 103 Stat. 2426,
provided that:
''(1) In general. - Except as provided in this subsection, the
amendments made by this section (enacting this section, amending
sections 48, 267, 312, 447, 464, and 471 of this title, and
repealing sections 189, 278, and 280 of this title) shall apply to
costs incurred after December 31, 1986, in taxable years ending
after such date.
''(2) Special rule for inventory property. - In the case of any
property which is inventory in the hands of the taxpayer -
''(A) In general. - The amendments made by this section shall
apply to taxable years beginning after December 31, 1986.
''(B) Change in method of accounting. - If the taxpayer is
required by the amendments made by this section to change its
method of accounting with respect to such property for any
taxable year -
''(i) such change shall be treated as initiated by the
taxpayer,
''(ii) such change shall be treated as made with the consent
of the Secretary, and
''(iii) the period for taking into account the adjustments
under section 481 by reason of such change shall not exceed 4
years.
''(3) Special rule for self-constructed property. - The
amendments made by this section shall not apply to any property
which is produced by the taxpayer for use by the taxpayer if
substantial construction had occurred before March 1, 1986.
''(4) Transitional rule for capitalization of interest and taxes.
-
''(A) Transition property exempted from interest
capitalization. - Section 263A of the Internal Revenue Code of
1986 (as added by this section) and the amendment made by
subsection (b)(1) (repealing section 189 of this title) shall not
apply to interest costs which are allocable to any property -
''(i) to which the amendments made by section 201 (amending
sections 46, 167, 168, 178, 179, 280F, 291, 312, 465, 467, 514,
751, 1245, 4162, 6111, and 7701 of this title) do not apply by
reason of sections 204(a)(1)(D) and (E) and 204(a)(5)(A) (set
out as a note under section 168 of this title), and
''(ii) to which the amendments made by section 251 (amending
sections 46 and 48 of this title and enacting provisions set
out as a note under section 46 of this title) do not apply by
reason of section 251(d)(3)(M) (set out as a note under section
46 of this title).
''(B) Interest and taxes. - Section 263A of such Code shall not
apply to property described in the matter following subparagraph
(B) of section 207(e)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982 (section 207(e)(2)(B) of Pub. L.
97-248, formerly set out as a note under section 189 of this
title) to the extent it would require the capitalization of
interest and taxes paid or incurred in connection with such
property which are not required to be capitalized under section
189 of such Code (as in effect before the amendment made by
subsection (b)(1)) (repealing section 189 of this title).
''(5) Transition rule concerning capitalization of inventory
rules. - In the case of a corporation which on the date of the
enactment of this Act (Oct. 22, 1986) was a member of an affiliated
group of corporations (within the meaning of section 1504(a) of the
Internal Revenue Code of 1986), the parent of which -
''(A) was incorporated in California on April 15, 1925,
''(B) adopted LIFO accounting as of the close of the taxable
year ended December 31, 1950, and
''(C) was, on May 22, 1986, merged into a Delaware corporation
incorporated on March 12, 1986,
the amendments made by this section shall apply under a cut-off
method whereby the uniform capitalization rules are applied only in
costing layers of inventory acquired during taxable years beginning
on or after January 1, 1987.
''(6) Treatment of certain rehabilitation project. - The
amendments made by this section shall not apply to interest and
taxes paid or incurred with respect to the rehabilitation and
conversion of a certified historic building which was formerly a
factory into an apartment project with 155 units, 39 units of which
are for low-income families, if the project was approved for annual
interest assistance on June 10, 1986, by the housing authority of
the State in which the project is located.
''(7) Special rule for casualty losses. - Section 263A(d)(2) of
the Internal Revenue Code of 1986 (as added by this section) shall
apply to expenses incurred on or after the date of the enactment of
this Act (Oct. 22, 1986).''
ALLOCATION RATIO FOR APPORTIONING STORAGE COSTS AND RELATED
HANDLING COSTS
Section 1008(b)(8) of Pub. L. 100-647 provided that: ''The
allocation used in the regulations prescribed under section
263A(h)(2) of the Internal Revenue Code of 1986 for apportioning
storage costs and related handling costs shall be determined by
dividing the amount of such costs by the beginning inventory
balances and the purchases during the year and by multiplying the
resulting allocation ratio by inventory amounts determined in
accordance with the provisions of the joint explanatory statement
of the committee of conference of the conference report
accompanying H.R. 3838 (H.R. Rept. No. 99-841, Vol. II., 99th
Cong., 2d Sess. II-306-307 (1986)).''
AMORTIZATION OF PAST SERVICE PENSION COSTS
Pub. L. 100-203, title X, Sec. 10204, Dec. 22, 1987, 101 Stat.
1330-394, provided that:
''(a) In General. - For purposes of sections 263A and 460 of the
Internal Revenue Code of 1986, the allocable costs (within the
meaning of section 263A(a)(2) or section 460(c) of such Code,
whichever is applicable) with respect to any property shall include
contributions paid to or under a pension or annuity plan whether or
not such contributions represent past service costs.
''(b) Effective Date. -
''(1) In general. - Except as provided in paragraph (2),
subsection (a) shall apply to costs incurred after December 31,
1987, in taxable years ending after such date.
''(2) Special rule for inventory property. - In the case of any
property which is inventory in the hands of the taxpayer -
''(A) In general. - Subsection (a) shall apply to taxable
years beginning after December 31, 1987.
''(B) Change in method of accounting. - If the taxpayer is
required by this section to change its method of accounting for
any taxable year -
''(i) such change shall be treated as initiated by the
taxpayer,
''(ii) such change shall be treated as made with the
consent of the Secretary of the Treasury or his delegate, and
''(iii) the net amount of adjustments required by section
481 of the Internal Revenue Code of 1986 shall be taken into
account over a period not longer than 4 taxable years.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 168, 172, 264, 265, 312,
447, 448, 460, 471, 475, 943, 1301 of this title.
