B is corrent. The requirement is to determine which of the costs is subject to the Uniform Capitalization Rules of Code Sec. 263A. Uniform capitalization (UNICAP) rules generally require that all costs incurred in manufacturing or constructing real or personal property, or in purchasing or holding property for sale, must be capitalized as part of the cost of the property. Among the costs that are excepted from the UNICAP rules are research and experimental expenditures, mine development and exploration costs, and the costs incurred by a freelance writer, photographer, or artist whose personal efforts create the product. Also excepted from the UNICAP rules are the costs of small retailers and wholesalers who acquire personal property for resale if the retailer’s or wholesaler’s average gross receipts for the preceding three tax years do not exceed $10 million. However, the warehousing costs incurred by a manufacturing company with $12 million in annual gross receipts do not fall within any of the exceptions and are subject to the UNICAP rules.
A is incorrect because warehousing costs incurred by a manufacturing company with $12 million annual gross receipts would be subject to the UNICAP rules of Sec. 263A.
C is incorrect because warehousing costs incurred by a manufacturing company with $12 million annual gross receipts would be subject to the UNICAP rules of Sec. 263A.
D is incorrect because warehousing costs incurred by a manufacturing company with $12 million annual gross receipts would be subject to the UNICAP rules of Sec. 263A.
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