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Exceptions to Code Requirements to Maintain Inventories: “How Many” and “What Kinds” of Businesses” Benefit?
Robert E. Blatz Jr.,
University of Michigan - Dearborn
ABSTRACT. Administrative exceptions to code sections and treasury regulations often trigger tax policy queries. Chiefly, how are taxpayers impacted? How many taxpayers will be affected? Who are these taxpayers? Two such exceptions: Rev. Proc. 2001-10 and Rev. Proc. 2002-28 are examined. These Revenue Procedures provide exceptions for small businesses from general statutory mandates to maintain inventories, use accrual accounting, and capitalize direct and indirect costs. Rev. Proc. 2001-10 targets businesses with significant inventory activity, while Rev. Proc. 2002-28 is directed at non-inventory/service providers for whom it is unclear if such providers are selling merchandise and if that sale of merchandise is an income-producing factor. This article surveys accounting method rules and briefly examines the requirements of the above Revenue Procedures to answer the first of the above three questions. IRS Statistics of Income (SOI) data tables are analyzed to answer the latter two questions.
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