IRS Will No Longer Challenge Negative Additional Sec. 263A Costs

Section 263A is the Uniform Capitalization Rules relating to inventory. Enacted about 1986, it essentially requires companies that fall under its requirements to include more costs in inventory than they would otherwise do for financial accounting purposes. In other words, it was a revenue raiser - keep more costs in inventory and off the income statement.

Section 263A isn't usually a major problem for the typical producer who only has a few days inventory on hand. But producers with quarries, block operations or anything else that qualifies as finished goods can be subject to it.

Just read an article in CPA2Biz on that provides a pretty good summary on the subject.