Get Uniform Capitalization Rules Nursery Growers

263A provide that, in general, the direct costs and the properly allocable share of the indirect costs of real or tangible personal property produced or tangible or certain intangible property acquired for resale must either be capitalized to inventory or, in the case of self-constructed property, into the basis of the ...

The UNICAP rules apply to those who, in the course of their trade or business, produce real property for use in the business or activity; produce real property for sale to customers; or acquire property for resale.

Section 263a mainly applies to those who are either considered producers or resellers. Producers are those who build, , manufacture, construct, or improve in or on property. Resellers are those who do not create inventory but rather purchase it and then resell it to another party.

There are several additional exceptions to the UNICAP rules, including: Certain costs incurred by agricultural businesses. Certain costs associated with natural gas and mineral property. Costs of authors, photographers, and artists.

Do not use “agriculture education.” Lowercase unless the term is part of a title or formal name.

§263A. These rules, known as the “uniform capitalization rules” apply to taxpayers that have a long-term crop with more than a two-year pre-productive period. The rules operate to bar deductions for the costs associated with the crop during the pre-productive period.

Under IRC Section 448, small businesses with a $25 million or less three-year average of gross receipts (small-business taxpayer exception) are permitted to use the cash method of accounting. This threshold was indexed for inflation and stands at $26 million for taxable years beginning in 2020 or 2021.

The UNICAP rules apply to those who, in the course of their trade or business, produce real property for use in the business or activity; produce real property for sale to customers; or acquire property for resale.