Tax case meno Research Paper Example | Topics and Well Written Essays - 1000 words

Tax case meno - Research Paper ExampleNormally, the cost of tools forms subprogram of crown goods that the company requires to run its operation. Under the IRC section 263A, the uniform capitalization rule dictates that the taxpayer should produce info for all direct be and certain in direct cost concerning tangible and real property. The impartiality defines tangible and real property as those that lead to payoff such as to construct, build, install, manufacture, develop, improve, create, raise or grow (DiNardo, Baldwin and Harris 106). From this provision of the law, it is evident that the allowances that the company pays to cater for the cost of various tools of trade illuminate beneath capital goods and that they are tangible in nature. If this were the case, the provision of IRC section 263A, states that the taxpayer should treat such information as direct because they affect the cost of capital. It follows therefore, that Cambro Construction companion should treat the allowances it reimburses as cost for capital goods. Combro Company should treat this case as cost associated with tangible assets, which it uses to aid production. Therefore, the tax treatment for this case should be ordinary. Under this category, the taxpayer should accumulate all the information concerning this cost and treat them a cost of assets used in production. Thus, Cambro Construction Company should prepare tax report concerning the accumulated cost it incurred to reimburse cost for the capital goods. For a cost to qualify as capitalization cost under IRC section 263A, it must hang into the capital accounts as defined by section 1.446-1(c) (1) (ii). This provision tends to define the treatment of cost incurred by a company to buy assets or other related costs. The section 263A states that Except as otherwise provided, direct and indirect costs that directly benefit or are incurred by reason of the operation of production or resale activities must be capitalized to the property produced or acquired for resale (DiNardo, Baldwin and Harris 106). The provision of section 1.263A-1(e) (3) (iii) gives examples of indirect costs which the taxpayers should capitalize are tools and equipment. Further, this provision indicates that the producers must capitalize costs other interest whether incurred before, during, and after production period of property. Arguing from this provision, the cost incurred by Cambro Construction Company to reimburse the capital cost of its carpenters fall under the indirect costs. Thus, Cambro Construction Company should treat such indirect cost as provided for in the section 263A of the IRC. The must record this information whether it incurred it before, during, or after the production period. This implies that the law does not set free the company from compiling tax information concerning the property that it acquired during its construction period. Largely, the fact that Cambro Construction Company does its activities with an beat of reselling them further makes it necessary for it to capitalize this cost. Cases bordering incidental repair of property seems to be closer to the above facts exactly not exact. In incidental repair, the taxpayer deducts a given cost to repair of the property with a experience of prolonging the use of that property. Section 167 provides the treatment of such repairs. When a taxpayer makes full replacement for the property, the treatment that follows should be capitalization or depreciation as