IRS Practice Unit: Determining Interest Capitalization for Self-Constructed Assets (IRC §263A)

If a taxpayer meets the criteria of “producing designated property” and is subject to interest capitalization (rather than expensing) under tax code Section 263A(f), then the following steps should be used to determine the amount to be capitalized, the IRS Large Business and International Process Unit outlined in a practice unit released February 16. The steps, all explained with factors to consider as well as statutory references, are: (1) Determine the Unit of Property; (2) Determine the Production Period; (3) Determine the Computation Period; (4) Determine the Measurement Dates; (5) Calculate the Accumulated Production Expenditures; (6) Apply the ...