2 Ways to Cut Inventory Taxes

An IRS decision made in late 2010 has created two new ways of treating inventory that could save a construction equipment dealership thousands of dollars in taxes. Before then, the IRS required dealerships to include storage and handling costs in the total values of their inventories. The practice, called capitalization, increased the income on which a dealership was taxed.

In Nov. 2010, the federal government enacted Revenue Procedure 2010-44, which offers two new “safe-harbor” options to help dealerships that have $10 million or more in annual gross receipts reduce their inventory capitalization and resulting taxes.

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