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

Form 1125-A (12-2011)

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

period for the tax year as per-unit retain

method will be deemed to clearly reflect

Year

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, I.

the result on line 1. If there is a difference

cooperative to a patron with respect to

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

Nonqualified per-unit retain certificates

If you account for inventoriable items in the

information on changes in the method of

redeemed this year. Include the amount

same manner as materials and supplies

accounting for inventory, see Form 3115

paid in money or other property (except

that are not incidental, enter amounts paid

and the Instructions for Form 3115.

amounts already included as per-unit retain

for all raw materials and merchandise

Line 9a. Method of valuing closing

certificates) to patrons to redeem

during the tax year on line 2. The amount

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

nonqualified per-unit retain certificates. No

you can deduct for the tax year is figured

used for valuing inventories. Under lower of

deduction is allowed at the time of

on line 8.

cost or market, the term “market” (for

issuance for a nonqualified per-unit retain

normal goods) means the current bid price

Reduce purchases by items withdrawn

certificate. However, the cooperative may

prevailing on the inventory valuation date

for personal use. For a partnership, the

take a deduction in the year the certificate

for the particular merchandise in the

cost of these items should be shown on

is redeemed, subject to the stated dollar

volume usually purchased by the filer. For a

Schedule K and Schedule K-1 as

amount of the certificate. See section 1383.

manufacturer, market applies to the basic

distributions to partners.

Also see the instructions for line 29h of

elements of cost—raw materials, labor, and

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

Line 4. Additional Section 263A

burden. If section 263A applies, the basic

Cooperative Associations, for a special rule

Costs

elements of cost must reflect the current

for figuring the cooperative's tax in the year

bid price of all direct costs and all indirect

of redemption of a nonqualified per-unit

If you elected a simplified method of

costs properly allocable to goods on hand

retain certificate.

accounting, enter on line 4 the balance of

at the inventory date.

section 263A costs paid or incurred during

Line 7. Inventory at End of Year

Inventory may be valued below cost

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

when the merchandise is unsalable at

See Regulations sections 1.263A-1 through

normal prices or unusable in the normal

1.263A-3 for details on figuring the amount

If you elected the simplified production

way because the goods are subnormal due

of additional section 263A costs to be

method, additional section 263A costs are

to damage, imperfections, shopwear,

included in ending inventory. If you account

generally those costs, other than interest,

change of style, odd or broken lots, or

for inventoriable items in the same manner

that were not capitalized under your

other similar causes, including second-

as materials and supplies that are not

method of accounting immediately prior to

hand goods taken in exchange. The goods

incidental, enter on line 7 the portion of its

the effective date of section 263A, but are

may be valued at the bona fide selling

raw materials and merchandise purchased

now required to be capitalized under

price, minus the direct cost of disposition

for resale that was included in the total on

section 263A. For details, see Regulations

(but not less than scrap value). Bona fide

line 6 but was not sold during the year.

section 1.263A-2(b).

selling price means actual offering of

Line 8. Costs of Goods Sold

If you elected the simplified resale

goods during a period ending not later than

method, additional section 263A costs are

30 days after inventory date.

Enter the amount from line 8 on your tax

generally those costs incurred with respect

return as follows. Filers of Form 1120,

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

to the following categories.

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

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

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

inventory method was either adopted or

• Off-site storage or warehousing.

of Form 1120-F, enter cost of goods sold

extended to inventory goods not previously

• Purchasing.

on page 3, Section II, line 2.

valued under the LIFO method provided in

section 472, attach Form 970, Application

• Handling, such as processing,

Lines 9a Through 9f. Inventory

To Use LIFO Inventory Method, or a

assembling, repackaging, and transporting.

Valuation Methods

statement with the information required by

• General and administrative costs (mixed

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

Inventories can be valued at:

service costs).

On line 9d, enter the amount of total

• Cost,

Line 5. Other Costs

closing inventories computed under

• Cost or market value (whichever is lower),

section 472. Estimates are acceptable.

Enter on line 5 any costs paid or incurred

If you changed or extended your

during the tax year not entered on lines 2

• Any other method approved by the IRS

inventory method to LIFO and had to write

through 4. Attach a statement listing details

that conforms to the requirements of the

up the opening inventory to cost in the

of the costs.

applicable regulations cited below.

year of election, report the effect of the

Special Rules for Cooperatives.

However, if you are using the cash

write-up as other income, on your

Cooperatives are allowed to deduct certain

method of accounting, you are required to

applicable return, proportionately over a 3-

per-unit retain allocations. Include these

use cost.

year period that begins with the year of the

costs on line 5. Attach a statement listing

LIFO election.

Rolling average method. Generally, a

details of per-unit retain allocations paid in:

rolling average method that is used to

• Qualified per-unit retain certificates,

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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