Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
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Part 2 Inventory Chapter 6 General – Non LIFO Automobile dealerships have a great deal of discretion in what accounting methods they will employ for various classes of their inventoried items. Whatever method the taxpayer chooses, it must clearly reflect income. If there exists confidence in the taxpayer’s books and records, the verification of Cost of Sales can be modified. The scope of the inquiry can be narrowed allowing the agent to dedicate audit resources to specific examination techniques: 1. Make sure everything that should be inventoried is included in an inventory account. 2. Verify that an allowable method is being used. 3. Scrutinize any adjustments made to inventory accounts. Auto dealerships typically maintain distinct inventories and tend to account for them differently. Among the types of inventoried items are: 1. New vehicles 2. Used vehicles 3. Parts and Accessories The methods used for valuing and accounting for these classes of items do differ from dealership to dealership but are generally directed by the size of the firm. By revisiting our classification types from financial status, we can look at inventory issues as falling into one of three categories: Type A – Schedule C Used Cars The smaller "lots" usually do not wish to invest the time, energy, and financial resources into a complex inventory system. They tend to use Lower of Cost or Market (LCM) to value vehicles and do not maintain any other inventories. At yearend, a valuation guide may be used to value the automobiles on an individual basis using 100 percent of the average wholesale valuation quote. The dealership then determines a write down or may compute an ending inventory adjustment for the year. (See RR 67-107 and Treas. Reg. section 1.471.4) 6-1
- Page 1 and 2: Internal Revenue Service Market Seg
- Page 3 and 4: Preface One of the goals envisioned
- Page 5 and 6: Table of Contents Preface .........
- Page 7 and 8: The Reinsurance Transaction .......
- Page 9 and 10: Part 1 General Focus and Procedure
- Page 11 and 12: 1. Type A Return Information Schedu
- Page 13 and 14: Percentage has gone down. The incre
- Page 15 and 16: the principal shareholders to finan
- Page 17 and 18: Rents $ 500,000 Interest $ 50,000 C
- Page 19 and 20: Conclusion "Financial status" is on
- Page 21 and 22: Chapter 2 Getting Started The key t
- Page 23 and 24: entities and their purpose and rela
- Page 25 and 26: It is recommended that officer comp
- Page 27 and 28: Chapter 3 Standard Audit Index Numb
- Page 29 and 30: Chapter 4 Books and Records Charact
- Page 31 and 32: c. Reconcile (2): Beginning Trial B
- Page 33 and 34: 3 Repair Order Sales 4 Parts Sales
- Page 35 and 36: Conclusion Although intimidating at
- Page 37 and 38: Chapter 5 Balance Sheet Why do we c
- Page 39: When an adjustment to a balance she
- Page 43 and 44: . Purchasing c. Handling, processin
- Page 45 and 46: dealerships use specific identifica
- Page 47 and 48: Chapter 7 LIFO Background Overview
- Page 49 and 50: A Short History of LIFO Application
- Page 51 and 52: improper inflation through unwarran
- Page 53 and 54: Introduction Chapter 8 Computing LI
- Page 55 and 56: The double extension index formula
- Page 57 and 58: as one item, there would probably n
- Page 59 and 60: (existing items) and non-comparable
- Page 61 and 62: The current-year costs that can be
- Page 63 and 64: Assuming the dealership elects LIFO
- Page 65 and 66: matching of revenues and costs. Thu
- Page 67 and 68: section 1.471-9. Both of these regu
- Page 69 and 70: providing to the credit subsidiary
- Page 71 and 72: Under elections made prior to Decem
- Page 73 and 74: Base Year Cost 9112 $224,000 You ha
- Page 75 and 76: BLS Sanity Check A simpler means to
- Page 77 and 78: CYC = Current Year Cost. This is th
- Page 79 and 80: Computation of 1993 Increment and R
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- Page 83 and 84: Specific Identification Increment M
- Page 85 and 86: which may be identified by a unique
- Page 87 and 88: Step # 3 For each item category, ad
- Page 89 and 90: Step # 10 Compute the total cost of
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