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

Form 1125-A (Rev. 12-2012)

Page

Specific Instructions

Per-unit retain allocations. A cooperative

However, if a filer uses the average cost

is allowed to deduct from its taxable

method for financial accounting purposes,

Line 1. Inventory at Beginning of

income amounts paid during the payment

there are safe harbors under which this

Year

period for the tax year as per-unit retain

method will be deemed to clearly reflect

allocations to the extent paid in money,

income for federal income tax purposes.

If you are changing your method of

qualified per-unit retain certificates or other

For details, see Rev. Proc. 2008-43,

accounting for the current tax year, you

property with respect to marketing

2008-30 I.R.B. 186 as modified by Rev.

must refigure last year's closing inventory

occurring during such tax year. A per-unit

Proc. 2008-52, 2008-36 I.R.B. 587, as

using the new method of accounting. Enter

retain allocation is any allocation from a

modified by Rev. Proc. 2011-14, 2011-4

the result on line 1. If there is a difference

cooperative to a patron with respect to

I.R.B. 330, or a successor.

between last year's closing inventory and

products marketed for him without

Filers that use erroneous valuation

the refigured amount, attach an

reference to the cooperative net earnings.

methods must change to a method

explanation and take it into account when

A qualified per-unit retain certificate is any

permitted for federal income tax purposes.

figuring any section 481(a) adjustment.

per-unit retain certificate that the

Use Form 3115 to make this change.

distributee has agreed to take into account

For more information on inventory

Line 2. Purchases

at its stated dollar amount.

valuation methods, see Pub. 538. For more

If you account for inventoriable items in the

Nonqualified per-unit retain certificates

information on changes in the method of

same manner as materials and supplies

redeemed this year. Include the amount

accounting for inventory, see Form 3115

that are not incidental, enter amounts paid

paid in money or other property (except

and the Instructions for Form 3115.

for all raw materials and merchandise

amounts already included as per-unit retain

Line 9a. Method of valuing closing

during the tax year on line 2. The amount

certificates) to patrons to redeem

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

you can deduct for the tax year is figured

nonqualified per-unit retain certificates. No

used for valuing inventories. Under lower of

on line 8.

deduction is allowed at the time of

cost or market, the term “market” (for

issuance for a nonqualified per-unit retain

Reduce purchases by items withdrawn

normal goods) means the current bid price

certificate. However, the cooperative may

for personal use. For a partnership, the

prevailing on the inventory valuation date

take a deduction in the year the certificate

cost of these items should be shown on

for the particular merchandise in the

is redeemed, subject to the stated dollar

Schedule K and Schedule K-1 as

volume usually purchased by the filer. For a

amount of the certificate. See section 1383.

distributions to partners.

manufacturer, market applies to the basic

Also see the instructions for line 29h of

elements of cost—raw materials, labor, and

Line 4. Additional Section 263A

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

burden. If section 263A applies, the basic

Costs

Cooperative Associations, for a special rule

elements of cost must reflect the current

for figuring the cooperative's tax in the year

If you elected a simplified method of

bid price of all direct costs and all indirect

of redemption of a nonqualified per-unit

accounting, enter on line 4 the balance of

costs properly allocable to goods on hand

retain certificate.

section 263A costs paid or incurred during

at the inventory date.

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

Line 7. Inventory at End of Year

Inventory may be valued below cost

when the merchandise is unsalable at

See Regulations sections 1.263A-1 through

If you elected the simplified production

normal prices or unusable in the normal

1.263A-3 for details on figuring the amount

method, additional section 263A costs are

way because the goods are subnormal due

of additional section 263A costs to be

generally those costs, other than interest,

to damage, imperfections, shopwear,

included in ending inventory. If you account

that were not capitalized under your

change of style, odd or broken lots, or

for inventoriable items in the same manner

method of accounting immediately prior to

other similar causes, including second-

as materials and supplies that are not

the effective date of section 263A, but are

hand goods taken in exchange. The goods

incidental, enter on line 7 the portion of

now required to be capitalized under

may be valued at the bona fide selling

your raw materials and merchandise

section 263A. For details, see Regulations

price, minus the direct cost of disposition

purchased for resale that was included in

section 1.263A-2(b).

(but not less than scrap value). Bona fide

the total on line 6 but was not sold during

selling price means actual offering of

the year.

If you elected the simplified resale

goods during a period ending not later than

method, additional section 263A costs are

Line 8. Cost of Goods Sold

30 days after inventory date.

generally those costs incurred with respect

Enter the amount from line 8 on your tax

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

to the following categories.

return as follows. Filers of Form 1120,

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

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

• Off-site storage or warehousing.

inventory method was either adopted or

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

extended to inventory goods not previously

• Purchasing.

of Form 1120-F, enter cost of goods sold

valued under the LIFO method provided in

• Handling, such as processing,

on page 3, Section II, line 2.

section 472, attach Form 970, Application

assembling, repackaging, and transporting.

To Use LIFO Inventory Method, or a

Lines 9a Through 9f. Inventory

• General and administrative costs (mixed

statement with the information required by

Valuation Methods

service costs).

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

Inventories can be valued at:

On line 9d, enter the amount of total

Line 5. Other Costs

closing inventories computed under

• Cost,

Enter on line 5 any costs paid or incurred

section 472. Estimates are acceptable.

• Cost or market value (whichever is lower),

during the tax year not entered on lines 2

If you changed or extended your

through 4. Attach a statement listing details

inventory method to LIFO and had to write

• Any other method approved by the IRS

of the costs.

up the opening inventory to cost in the year

that conforms to the requirements of the

Special Rules for Cooperatives

of election, report the effect of the write-up

applicable regulations cited below.

as other income, on your applicable return,

Cooperatives are allowed to deduct certain

However, if you are using the cash

proportionately over a 3-year period that

per-unit retain allocations. Include these

method of accounting, you are required to

begins with the year of the LIFO election.

costs on line 5. Attach a statement listing

use cost.

details of per-unit retain allocations paid in:

Rolling average method. Generally, a

• Qualified per-unit retain certificates,

rolling average method that is used to

value inventories for financial accounting

• Money or other property (except

purposes does not clearly reflect income

nonqualified per-unit certificates), and

for federal income tax purposes.

• Nonqualified per-unit retain certificates

redeemed this year.

Form 1125-A - Cost Of Goods Sold Page 2

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