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Negative UNICAP Adjustments under the Simplified Production Method

Posted: 8 Jan 2005  

W. Eugene Seago

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems

Abstract

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.

Suggested Citation

Seago, W. Eugene, Negative UNICAP Adjustments under the Simplified Production Method. Tax Notes, Vol. 106, No. 2, January 10, 2004. Available at SSRN: https://ssrn.com/abstract=645482

W. Eugene Seago (Contact Author)

Virginia Polytechnic Institute & State University - Department of Accounting and Information Systems ( email )

Pamplin College of Business
Blacksburg, VA 24061
United States
540-231-6564 (Phone)

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