Negative UNICAP Adjustments under the Simplified Production Method
W. Eugene Seago
Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems
Tax Notes, Vol. 106, No. 2, January 10, 2004
In this article, Seago addresses the complications that arise when the taxpayer is required to reduce inventory values per books to a valuation as determined using the simplified production method. Seago demonstrates that the taxpayer may add some costs to inventory using the taxpayer's method of allocation, but when those costs are removed using a different technique - the simplified production method formula - the net result is a distortion of income. Generally, it is to be expected that a simplified method sacrifices accuracy for expediency, but there may be situations in which the formula can be tweaked to achieve more accurate results without sacrificing expediency, Seago concludes.
Date posted: January 8, 2005
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