TCJA Company being on cash basis if revenue is under 25MM

Can taxpayer change method to NIMS treatment, but continue to capitalize labor and overhead for internal bookkeeping purposes and do an M-1 adjustment on their tax return?

Wiles, I think you've jumped ahead in the game. We don't have confirmation that we don't have to capitalize direct costs to NIMS yet.

Both the committee reports and the JCT Blue Book say that the current treatment under Rev. Procs. 2001-10 and 2002-28 is treating inventory as non-incidental materials and supplies. That treatment involves expensing labor and overhead. They then reiterate that treating inventory as non-incidental materials and supplies is one of the options under the TCJA. Even assuming arguendo that this evidence of legislative intent can be disregarded, the comment letters I mentioned upthread by Les Schneider and the AICPA Tax Section both demonstrate how to arrive at this position via first principles, i.e. by looking at the treatment of materials and supplies prior to TRA '86. So it appears safe to say that an M-1 to get to NM&S treatment is okay. The taxpayer couldn't use the DMSH, but it would otherwise allow expense acceleration.

Coddington, what about this:

https://bakertilly.com/insights/new-pro ... g-methods/

That was written before the JCT issued the Blue Book. I was saying the same thing back then.

-So, we can elect to treat inventory as non-incidental materials and supplies(with 3115), and take it off the books.

Can we expense the inventory at that time? I would think so, but I am not 100% Sure.

https://www.law.cornell.edu/uscode/text/26/471

I read 471 as:

Generally you must keep inventory, and adjust profit and loss for items purchased for resale, UNLESS: (c) 1.you meet the gross receipts test of making less than 25 million gross; 2.You elect to treat inventory as non-incidental materials and supplies; 3. You remove the inventory from your books.

You remove the inventory from your books.

Just books? Or is it books and records?

My client would like to keep a spreadsheet of their inventory on hand including cost? Maybe a spreadsheet is too record-like.

I generally read books and records as referring to their permanent books of account and/or reviewed financials or compilations. Extending it to all records would reduce this to a nullity in all states that require a rendition of the business inventory for ad valorem purposes. I think the best thing to do, until guidance is out, is to draw an analogy with the LIFO conformity requirement and the ample guidance under those regulations.

Does anyone have an answer (or a guess) to JAD's question in post #15?

"Brian, then is this correct: Taxpayer makes and sells beer. Taxpayer buys ingredients and bottles. Taxpayer pays $2 million for 2 million bottles. Each bottle costs $1. Ingredients and bottles are treated as non-incidental materials and supplies. All costs may be expensed under DMSH?

If taxpayer spends $10,000 on 5,000 pounds of sugar, how is the unit of sugar measured for purposes of the $2,500 DMSH limit? $10,000 is obviously more than $2,500. Is it measured by pound, by grain, etc?

If taxpayer spends $10,000 on 5,000 pounds of sugar, how is the unit of sugar measured for purposes of the $2,500 DMSH limit? $10,000 is obviously more than $2,500. Is it measured by pound, by grain, etc?

It is measured by the way it is invoiced. I have been involved in the baking industry in the past, and I can assure that sugar is not invoiced by the grain.

EXTAX, please see Coddington’s post #23 above:

The taxpayer couldn't use the DMSH, but it would otherwise allow expense acceleration.

I think Brian is saying that DMSH is not available for non-incidental materials & supplies. Hopefully he will weigh in.

Am I right in thinking we can elect to treat inventory as NIMS, and still be on the Accrual method of accounting?

Yes. Most small retailers and wholesalers will probably do that.