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2013 Tax Return

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2013 Tax Return

2013 tax return Index A Abandonment of home, Abandonment. 2013 tax return Absence, temporary, Temporary absence. 2013 tax return Abstract fees, Settlement fees or closing costs. 2013 tax return Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. 2013 tax return Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. 2013 tax return Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. 2013 tax return Architect's fees, Construction. 2013 tax return Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 2013 tax return Assistance (see Tax help) B Back interest, Settlement fees or closing costs. 2013 tax return Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. 2013 tax return Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). 2013 tax return C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. 2013 tax return Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. 2013 tax return Commissions, Selling expenses. 2013 tax return , Settlement fees or closing costs. 2013 tax return Community property Basis determination, Community property. 2013 tax return Condemnation Gain exclusion, Home destroyed or condemned. 2013 tax return Ownership and use test when previous home condemned, Previous home destroyed or condemned. 2013 tax return Condominiums As main home, Main Home Basis determination, Condominium. 2013 tax return Construction costs, Construction. 2013 tax return Built by you, Built by you. 2013 tax return Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. 2013 tax return Ownership and use tests, Cooperative apartment. 2013 tax return Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. 2013 tax return D Date of sale, Date of sale. 2013 tax return Death Sale due to, Specific event safe harbors. 2013 tax return Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. 2013 tax return Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. 2013 tax return Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. 2013 tax return Ownership and use test when previous home destroyed, Previous home destroyed or condemned. 2013 tax return Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. 2013 tax return Disasters, Specific event safe harbors. 2013 tax return Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. 2013 tax return Home transferred to spouse, Transfer to spouse. 2013 tax return Ownership and use tests, Home transferred from spouse. 2013 tax return Sale due to, Specific event safe harbors. 2013 tax return Transfers after July 18, 1984, Transfers after July 18, 1984. 2013 tax return Transfers before July 19, 1984, Transfers before July 19, 1984. 2013 tax return Use of home after divorce, Use of home after divorce. 2013 tax return Doctor's recommendation for sale, Doctor's recommendation safe harbor. 2013 tax return E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. 2013 tax return Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. 2013 tax return Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. 2013 tax return F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. 2013 tax return Fire insurance premiums, Settlement fees or closing costs. 2013 tax return Foreclosure, Foreclosure or repossession. 2013 tax return Foreign Service, Foreign Service member. 2013 tax return Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 2013 tax return Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. 2013 tax return Form 1040, Schedule A Real estate taxes, Real estate taxes. 2013 tax return Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. 2013 tax return , Form 1099-S. 2013 tax return , Form 1099-S. 2013 tax return Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. 2013 tax return Form 8828 Recapture tax, How to figure and report the recapture. 2013 tax return Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). 2013 tax return NIIT, Net Investment Income Tax (NIIT). 2013 tax return Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. 2013 tax return Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. 2013 tax return Loss on sale, Loss on sale. 2013 tax return Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. 2013 tax return H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. 2013 tax return Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. 2013 tax return Charges for, Settlement fees or closing costs. 2013 tax return Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). 2013 tax return Inheritance Home received as, Home acquired from a decedent who died before or after 2010. 2013 tax return Installment sales, Installment sale. 2013 tax return Involuntary conversion, Specific event safe harbors. 2013 tax return ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). 2013 tax return J Joint owners not married, Joint owners not married. 2013 tax return Joint returns, Jointly owned home. 2013 tax return Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. 2013 tax return Sale of vacant land, Vacant land. 2013 tax return Legal fees, Selling expenses. 2013 tax return , Settlement fees or closing costs. 2013 tax return , Construction. 2013 tax return Legal separation Sale due to, Specific event safe harbors. 2013 tax return Like-kind exchange, Sale of home acquired in a like-kind exchange. 2013 tax return Living expenses, Reasonable basic living expenses. 2013 tax return Loan assumption fees, Settlement fees or closing costs. 2013 tax return Loan placement fees, Selling expenses. 2013 tax return Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. 2013 tax return Property used partly as, Property used partly as your main home. 2013 tax return , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. 2013 tax return Mortgage fees, Settlement fees or closing costs. 2013 tax return Mortgage insurance premiums, Settlement fees or closing costs. 2013 tax return Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. 2013 tax return Moving expense, Settlement fees or closing costs. 2013 tax return Multiple births Sale due to, Specific event safe harbors. 2013 tax return N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. 2013 tax return O Option to buy home, Option to buy. 2013 tax return Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. 2013 tax return P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. 2013 tax return Points, Selling expenses. 2013 tax return Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. 2013 tax return Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. 2013 tax return , Real estate taxes. 2013 tax return Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. 2013 tax return Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. 2013 tax return Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. 2013 tax return Relatives Sale of home to, Exception for sales to related persons. 2013 tax return Remainder interest Sale of, Sale of remainder interest. 2013 tax return Remodeling, Improvements. 2013 tax return , Exception. 2013 tax return (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). 2013 tax return Before closing, by buyer, Settlement fees or closing costs. 2013 tax return Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. 2013 tax return , Improvements. 2013 tax return , Repairs. 2013 tax return (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. 2013 tax return Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. 2013 tax return Doctor's recommendation for sale, Doctor's recommendation safe harbor. 2013 tax return Unforeseeable events, Specific event safe harbors. 2013 tax return Sales commissions, Selling expenses. 2013 tax return , Settlement fees or closing costs. 2013 tax return Sales to related persons, Exception for sales to related persons. 2013 tax return Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. 2013 tax return Seller-financed mortgages, Seller-financed mortgage. 2013 tax return Seller-paid points, Seller-paid points. 2013 tax return Selling expenses, Selling expenses. 2013 tax return Selling price, Selling Price Separate returns, Separate returns. 2013 tax return Settlement fees, Settlement fees or closing costs. 2013 tax return Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. 2013 tax return Surviving spouse Basis determination, Surviving spouse. 2013 tax return Ownership and use tests, Sale of main home by surviving spouse. 2013 tax return T Tax help, How To Get Tax Help Temporary absence, Temporary absence. 2013 tax return Temporary housing, Temporary housing. 2013 tax return Title insurance, Settlement fees or closing costs. 2013 tax return Title search fees, Settlement fees or closing costs. 2013 tax return Trading homes, Trading (exchanging) homes. 2013 tax return , Home received as trade. 2013 tax return Transfer taxes, Settlement fees or closing costs. 2013 tax return , Transfer taxes. 2013 tax return Transfer to spouse, Transfer to spouse. 2013 tax return After July 18, 1984, Transfers after July 18, 1984. 2013 tax return Before July 19, 1984, Transfers before July 19, 1984. 2013 tax return TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. 2013 tax return Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. 2013 tax return Utilities Charges for installing, Settlement fees or closing costs. 2013 tax return Charges related to occupancy of house before closing, Settlement fees or closing costs. 2013 tax return Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. 2013 tax return V Vacant land Sale of, Vacant land. 2013 tax return W Worksheets, Worksheets. 2013 tax return Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. 2013 tax return Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. 2013 tax return Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. 2013 tax return Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. 2013 tax return Reduced Maximum Exclusion Prev  Up     Home   More Online Publications
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Understanding your CP12R Notice

We made changes to the computation of the Rebate Recovery Credit on your return.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

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You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Review the notice, and compare our changes to the information on your tax return.
  • If you agree with the changes we made, do nothing; you should receive a refund check in 4-6 weeks, as long as you don't owe other tax or debts we're required to collect.
  • If you don't agree, call 1-800-829-8374 to review your account or contact us by mail. Include any correspondence or documentation.

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Answers to Common Questions

Why did I receive this notice?
We issue Notice CP12R when we correct one or more mistakes on your tax return, and

  • The overpayment is different from the one you expected, or
  • You have an overpayment when you thought you owed money or had an even balance, or
  • We computed your Recovery Rebate Credit for you on your tax return.

How can I find out what caused my tax return to change?
Please contact us at the toll free number listed on the top right corner of your notice for specific information concerning your tax return.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll free number listed on the top right corner of your notice.

What is the Rebate Recovery Credit?
The Recovery Rebate Credit is a special one-time benefit that most people received in 2008 in the form of an Economic Stimulus Payment. Learn more about the Recovery Rebate Credit.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 19-Feb-2014

The 2013 Tax Return

2013 tax return 6. 2013 tax return   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. 2013 tax return However, to determine these costs, you must value your inventory at the beginning and end of each tax year. 2013 tax return This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. 2013 tax return This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. 2013 tax return However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. 2013 tax return If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. 2013 tax return For more information, see chapter 2. 2013 tax return Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. 2013 tax return These lines are reproduced below and are explained in the discussion that follows. 2013 tax return 35 Inventory at beginning of year. 2013 tax return If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. 2013 tax return Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. 2013 tax return Subtract line 41 from line 40. 2013 tax return  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. 2013 tax return If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). 2013 tax return Opening inventory usually will be identical to the closing inventory of the year before. 2013 tax return You must explain any difference in a schedule attached to your return. 2013 tax return Donation of inventory. 2013 tax return   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. 2013 tax return The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. 2013 tax return You must remove the amount of your contribution deduction from your opening inventory. 2013 tax return It is not part of the cost of goods sold. 2013 tax return   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. 2013 tax return Treat the inventory's cost as you would ordinarily treat it under your method of accounting. 2013 tax return For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. 2013 tax return   A special rule may apply to certain donations of food inventory. 2013 tax return See Publication 526, Charitable Contributions. 2013 tax return Example 1. 2013 tax return You are a calendar year taxpayer who uses an accrual method of accounting. 2013 tax return In 2013, you contributed property from inventory to a church. 2013 tax return It had a fair market value of $600. 2013 tax return The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. 2013 tax return The charitable contribution allowed for 2013 is $400 ($600 − $200). 2013 tax return The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. 2013 tax return The cost of goods sold you use in determining gross income for 2013 must not include the $400. 2013 tax return You remove that amount from opening inventory for 2013. 2013 tax return Example 2. 2013 tax return If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. 2013 tax return You would not be allowed any charitable contribution deduction for the contributed property. 2013 tax return Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. 2013 tax return If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. 2013 tax return Trade discounts. 2013 tax return   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. 2013 tax return You must use the prices you pay (not the stated prices) in figuring your cost of purchases. 2013 tax return Do not show the discount amount separately as an item in gross income. 2013 tax return   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. 2013 tax return Cash discounts. 2013 tax return   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. 2013 tax return There are two methods of accounting for cash discounts. 2013 tax return You can either credit them to a separate discount account or deduct them from total purchases for the year. 2013 tax return Whichever method you use, you must be consistent. 2013 tax return If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. 2013 tax return For more information, see Change in Accounting Method in chapter 2. 2013 tax return   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. 2013 tax return If you use this method, do not reduce your cost of goods sold by the cash discounts. 2013 tax return Purchase returns and allowances. 2013 tax return   You must deduct all returns and allowances from your total purchases during the year. 2013 tax return Merchandise withdrawn from sale. 2013 tax return   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. 2013 tax return Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. 2013 tax return You must also charge the amount to your drawing account. 2013 tax return   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. 2013 tax return As stated above, you also use it to record withdrawals of merchandise for personal or family use. 2013 tax return This account is also known as a “withdrawals account” or “personal account. 2013 tax return ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. 2013 tax return Small merchandisers (wholesalers, retailers, etc. 2013 tax return ) usually do not have labor costs that can properly be charged to cost of goods sold. 2013 tax return In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. 2013 tax return Direct labor. 2013 tax return   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. 2013 tax return They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. 2013 tax return Indirect labor. 2013 tax return   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. 2013 tax return Other labor. 2013 tax return   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. 2013 tax return Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. 2013 tax return Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. 2013 tax return Those that are not used in the manufacturing process are treated as deferred charges. 2013 tax return You deduct them as a business expense when you use them. 2013 tax return Business expenses are discussed in chapter 8. 2013 tax return Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. 2013 tax return Containers. 2013 tax return   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. 2013 tax return If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. 2013 tax return Freight-in. 2013 tax return   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. 2013 tax return Overhead expenses. 2013 tax return   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. 2013 tax return The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. 2013 tax return Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. 2013 tax return Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. 2013 tax return Inventory at the end of the year is also known as closing or ending inventory. 2013 tax return Your ending inventory will usually become the beginning inventory of your next tax year. 2013 tax return Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. 2013 tax return Prev  Up  Next   Home   More Online Publications