- Mark as New
- Permalink
- Report Inappropriate Content
Please help me with handling of the Section 263a costs on Form 1125-A. The client had Section 263a costs from PY that was on the tax balance sheet, but not on the books balance sheet. Let's say PY Section 263a Costs adjustment was $20,000 which was reflected by increasing the ending inventory balance (not recorded on books, only on the tax return). This year the S. 263a costs are computed at $30,000.
If I enter $30k on the Additional S.263a costs on the 1125-A form, it increased the COGS rather than reducing it. What would be the right way to adjust for these costs from PY and CY. I am planning to show the $10k difference as an M-1 adjustment as there are no plans to adjust the inventory amount on the books. Any help will be greatly appreciated.
- Mark as New
- Permalink
- Report Inappropriate Content
If the inventory is different on the balance sheet versus the inventory on 1125-A, then the purchases line should be purchases + change in inventory (books balance sheet - beginning versus ending) + or - the 263A adjustment, then 263A adjustment should be recorded on 263A line on 1125-A and M-1 screen. Since your 263A went up by $30k, the purchases line should be reduced by the $30k. I hope this makes sense.
