21 February 1991 Income Tax Severed Letter

By services, 22 July, 2022
Language
English
Document number
Severed letter type
Miscellaneous
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
656275
Extra import data
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"field_external_guid": [
"menu:://Federal Income Tax [CCH Tax ]/Tax Window Files/Tax Window Files/Tax Window Files/1990s/1991 [MR91_194.197 - FE91_224.226]/FE91_077 — Pre-production Revenue - Inventory Valuation"
],
"field_proprietary_citation": [],
"field_release_date_new": "1991-02-21 07:00:00",
"field_tags": []
}
Main text

February 21, 1991

Special Audits Division                      Rulings Directorate
E.H. Gauthier                                Resource Industries
Director                                       Section
                                             P. Lee
Attention: Shaukat Lakhani                   957-9769
                                             7-4586
          24(1)

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 24(1) . 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/Director Bilingual Services and Resource Industries Division Rulings Directorate

000077