Changes in Accounting Method For Form 3115
By: Gardiner Thomsen CPAs | email
Last year, based on IRS guidance, we changed the way that Section 199 was computed. This year we are researching the Internal Revenue Code, specifically sections 1381, 1382 and 1383, which are related to Section 199, to investigate the possibility of writing down your tax basis member grain inventory (in dollars) to zero. This would have the affect of creating a tax deduction equal to your ending member grain inventory.
While we are still in the research stages, we are aware that one of the “big four” firms is moving forward with this write-down, and is in fact, contacting our clients. We believe this to be somewhat premature as the IRS is still in the process of ruling on contingent matters. However, this strategy is worthy of our continued investigation. It is based upon filing form 3115, which asks the IRS permission to compute inventory under the auspices of section 1383. Once the IRS grants this permission, your cooperative could record a tax deduction equal to your ending member grain inventory. In plain English –an extremely large tax deduction.
As always, we are on top of this cutting edge tax issue and are researching and planning strategy so that if in fact this is a viable option for you cooperative, we will implement this calculation.
