Depending on the facts and circumstances, reasonable methods may include methods based on gross receipts (defined in § 1.199A-8(b)(2)(iii)), number of units sold, number of units produced, or total production costs. Whether an allocation method is reasonable is based on all the facts and circumstances, including whether the Specified Cooperative uses the most accurate information available the relationship between COGS and the method used the accuracy of the method chosen as compared with other possible methods whether the method is used by the Specified Cooperative for internal management or other business purposes whether the method is used for other Federal or state income tax purposes the availability of costing information the time, burden, and cost of using alternative methods and whether the Specified Cooperative applies the method consistently from year to year. A Specified Cooperative must use a reasonable method based on all the facts and circumstances to allocate COGS between DPGR and non-DPGR. In the case of a sale, exchange, or other disposition (including, for example, theft, casualty, or abandonment) by the Specified Cooperative of non-inventory property, COGS for purposes of this section includes the adjusted basis of the property. COGS also include the Specified Cooperative's inventory valuation adjustments such as write-downs under the lower of cost or market method. If section 263A requires the Specified Cooperative to include additional section 263A costs (as defined in § 1.263A-1(d)(3)) in inventory, additional section 263A costs must be included in determining COGS. COGS is determined under the methods of accounting that the Specified Cooperative uses to compute taxable income. In determining its QPAI, the Specified Cooperative does not include in COGS any payment made, whether during the taxable year, or included in beginning inventory, for which a deduction is allowed under section 1382(b) and/or (c), as applicable.
#COGS COST OF GOODS SOLD PLUS#
In the case of a sale, exchange, or other disposition of inventory, COGS is equal to beginning inventory of the Specified Cooperative plus purchases and production costs incurred during the taxable year and included in inventory costs by the Specified Cooperative, less ending inventory of the Specified Cooperative.
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The Specified Cooperative determines its COGS allocable to DPGR in accordance with this paragraph (b)(1) or, if applicable, paragraph (f) of this section. When determining its QPAI, the Specified Cooperative (defined in § 1.199A-8(a)(2)) must subtract from its DPGR (defined in § 1.199A-8(b)(3)(ii)) the COGS allocable to its DPGR. The provisions of this section provide additional guidance on determining qualified production activities income (QPAI) as described and defined in § 1.199A-8(b)(4)(ii).
#COGS COST OF GOODS SOLD CODE#
The provisions of this section apply solely for purposes of section 199A(g) of the Internal Revenue Code (Code). § 1.199A-10 Allocation of cost of goods sold (COGS) and other deductions to domestic production gross receipts (DPGR), and other rules.
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