7-4586
24(1)
Subject: Pre-production Revenue Inventory Valuation
We are writing in reply to your memorandum of December 14, 1989 in which you requested our opinion regarding valuation of 24(1) inventory produced during the pre-commercial production period and tax treatment of revenues on its subsequent sales.
Our comments regarding pre-production revenue and inventory valuation in the placer mining industry, as stated in our memorandum #0-0159, are equally applicable in the situation of . Furthermore, in our opinion the value of inventory produced prior to and remaining on hand at the beginning of the date of commencement of production in reasonable commercial quantities become cost of sales in subsequent sales of such inventory, and the revenues from such sales should be recognized as income from production.
We hope that our comments are helpful to you.
Acting/DirectorBilingual Services and Resource Industries DivisionRulings Directorate