Uniform Capitalization Rules
Capitalize:
Taxes paid in connection with the property acquisition as part of the property’s cost
Types of Property in which UCRs [Uniform Capitalization Rules] apply:
3 [USR]
U – Produced for Use
S – Produced for Sale
R – Produced for Resale
The UCRs do not apply to inventory property acquired for resale if the TP average gross receipt for the preceding 3 years do not exceed $10,000,000 annually.
Capitalized as Inventory:
3[DOD]
D – DM [Direct Materials]
O – Overhead => Factory Overhead [FOH] = Applicable Indirect Costs = Capitalizable Expenses
D – DL [Direct Labor} => examples are compensation, vacation pay, and payroll taxes
Examples of FOH= Factory Overhead = Applicable Indirect Costs = Capitalizable Expenses
[U-SWIM-PARADISE]
U – Utilities
S – Storage; Supervisory Wages; Spoilage & Scrap
W – Warehousing
I – Indirect Labor
M – Maintenance
P – Pension Contributions
A – Administrative Supplies
R – Repairs; Rents; Repackaging
I – Insurance; Incentives=>Costs of Bonus & Other Incentive Plans; Indirect Supplies
D – Depreciation & Amortization
E – Engineering & Design
Costs Not Required to be Capitalized => otherwise called as Period Expense
7 [ORGASM]
O – Officer Compensation => not attributed to production services
R – Research & Development
G – General and Administrative Expenses
A – Advertising
S – Selling
M – Marketing Expenses
.