Fillable Form 1125-A - Cost Of Goods Sold (Page 2 of 3) in pdf

Form 1125-A (Rev. 10-2016)

Page

Specific Instructions

Per-unit retain allocations. A cooperative

Filers that use erroneous valuation

is allowed to deduct from its taxable

methods must change to a method

Line 1. Inventory at Beginning of

income amounts paid during the payment

permitted for federal income tax purposes.

Year

period for the tax year as per-unit retain

Use Form 3115 to make this change.

allocations to the extent paid in money,

For more information on inventory

If you are changing your method of

qualified per-unit retain certificates, or

valuation methods, see Pub. 538. For more

accounting for the current tax year, you

other property with respect to marketing

information on changes in the method of

must refigure last year's closing inventory

occurring during the tax year. A per-unit

accounting for inventory, see Form 3115

using the new method of accounting. Enter

retain allocation is any allocation from a

and the Instructions for Form 3115.

the result on line 1. If there is a difference

cooperative to a patron for products

between last year's closing inventory and

Line 9a. Method of valuing closing

marketed for him without reference to the

the refigured amount, attach an

inventory. On line 9a, check the method(s)

cooperative net earnings. A qualified per-

explanation and take it into account when

used for valuing inventories. Under lower of

unit retain certificate is any per-unit retain

figuring any section 481(a) adjustment.

cost or market, the term “market” (for

certificate that the distributee has agreed

normal goods) means the current bid price

Line 2. Purchases

to take into account at its stated dollar

prevailing on the inventory valuation date

amount.

If you account for inventoriable items in the

for the particular merchandise in the

same manner as materials and supplies

Nonqualified per-unit retain certificates

volume usually purchased by the filer. For a

that are not incidental, enter amounts paid

redeemed this year. Include the amount

manufacturer, market applies to the basic

for all raw materials and merchandise

paid in money or other property (except

elements of cost—raw materials, labor, and

during the tax year on line 2. The amount

amounts already included as per-unit retain

burden. If section 263A applies, the basic

you can deduct for the tax year is figured

certificates) to patrons to redeem

elements of cost must reflect the current

on line 8.

nonqualified per-unit retain certificates. No

bid price of all direct costs and all indirect

deduction is allowed at the time of

Reduce purchases by items withdrawn

costs properly allocable to goods on hand

issuance for a nonqualified per-unit retain

for personal use. For a partnership, the

at the inventory date.

certificate. However, the cooperative may

cost of these items should be shown on

Inventory may be valued below cost

take a deduction in the year the certificate

Schedule K and Schedule K-1 as

when the merchandise is unsalable at

is redeemed, subject to the stated dollar

distributions to partners.

normal prices or unusable in the normal

amount of the certificate. See section 1383.

way because the goods are subnormal due

Line 4. Additional Section 263A

Also see the instructions for line 29h of

to damage, imperfections, shopwear,

Costs

Form 1120-C, U.S. Income Tax Return for

change of style, odd or broken lots, or

Cooperative Associations, for a special rule

If you elected a simplified method of

other similar causes, including second-

for figuring the cooperative's tax in the year

accounting, enter on line 4 the balance of

hand goods taken in exchange. The goods

of redemption of a nonqualified per-unit

section 263A costs paid or incurred during

may be valued at the bona fide selling

retain certificate.

the tax year not includible on lines 2, 3, and

price, minus the direct cost of disposition

Line 7. Inventory at End of Year

(but not less than scrap value). Bona fide

selling price means actual offering of

If you elected the simplified production

See Regulations sections 1.263A-1 through

goods during a period ending not later than

method, additional section 263A costs are

1.263A-3 for details on figuring the amount

30 days after inventory date.

generally those costs, other than interest,

of additional section 263A costs to be

that were not capitalized under your

Lines 9c and 9d. LIFO method. If this is

included in ending inventory. If you account

method of accounting immediately prior to

the first year the Last-in, First-out (LIFO)

for inventoriable items in the same manner

the effective date of section 263A, but are

inventory method was either adopted or

as materials and supplies that are not

now required to be capitalized under

extended to inventory goods not previously

incidental, enter on line 7 the portion of

section 263A. For details, see Regulations

valued under the LIFO method provided in

your raw materials and merchandise

section 1.263A-2(b).

section 472, attach Form 970, Application

purchased for resale that was included in

To Use LIFO Inventory Method, or a

If you elected the simplified resale

the total on line 6 but was not sold during

statement with the information required by

method, additional section 263A costs are

the year.

Form 970. Check the LIFO box on line 9c.

generally those costs incurred with respect

Line 8. Cost of Goods Sold

On line 9d, enter the amount of total

to the following categories.

Enter the amount from line 8 on your tax

closing inventories computed under

• Off-site storage or warehousing.

return as follows. Filers of Form 1120,

section 472. Estimates are acceptable.

• Purchasing.

1120-C, 1120S, 1065, and 1065-B, enter

If you changed or extended your

• Handling, such as processing,

cost of goods sold on page 1, line 2. Filers

inventory method to LIFO and had to write

assembling, repackaging, and transporting.

of Form 1120-F, enter cost of goods sold

up the opening inventory to cost in the year

on Section II, line 2.

• General and administrative costs (mixed

of election, report the effect of the write-up

service costs).

as other income, on your applicable return,

Lines 9a Through 9f. Inventory

proportionately over a 3-year period that

Line 5. Other Costs

Valuation Methods

begins with the year of the LIFO election.

Enter on line 5 any costs paid or incurred

Inventories can be valued at:

during the tax year not entered on lines 2

• Cost,

through 4. Attach a statement listing details

• Cost or market value (whichever is lower),

of the costs.

Special Rules for Cooperatives

• Any other method approved by the IRS

that conforms to the requirements of the

Cooperatives are allowed to deduct certain

applicable regulations cited below.

per-unit retain allocations. Include these

costs on line 5. Attach a statement listing

However, if you are using the cash

details of per-unit retain allocations paid in:

method of accounting, you are required to

use cost.

• Qualified per-unit retain certificates,

• Money or other property (except

nonqualified per-unit certificates), and

• Nonqualified per-unit retain certificates

redeemed this year.

Form 1125-A - Cost Of Goods Sold Page 2

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