How frank will treat the oil filter inventory

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Reference no: EM132558419

Business with gross receipts of $25 million or less may treat inventory as non-incidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following:

Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters.

Question 1: Explain how Frank will treat his oil filter inventory.

Reference no: EM132558419

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