IRS to step up UNICAP enforcement – Dealerships have until Jan. 1, 2011, to comply
Abstract: Virtually all automobile dealerships report their inventories improperly, according to the IRS. A Taxpayer Advice Memorandum, TAM 200736026, suggests that most dealerships incorrectly apply Internal Revenue Code Section 263A to calculation of their inventories. Sec. 263A addresses the uniform capitalization of direct and indirect inventory costs. Currently, most dealers deduct these expenses each year by using the simplified retail method, rather than including them as part of their inventories. The agency has recently laid the groundwork to begin serious testing for noncompliance starting next January, and the revised rules affect all but the smallest dealers.