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  3. 5. motoco, inc. manufactures and designs mopeds fo

5. Motoco, Inc. manufactures and designs mopeds for sale throughout the world. In valuing its...

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Accounting

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5. Motoco, Inc. manufactures and designs mopeds for sale throughout the world. In valuing its inventory for tax purposes, the corporation is subject to the uniform capitalization rules under Code Sec. 263A. Pursuant to the rules, Motoco must include not only direct costs, but also a portion of certain indirect costs in their inventory costs. The president of Motoco argues that the IRS is wrong in expecting the corporation to treat some of the compensation paid to its officers as inventoriable costs. Therefore, she refuses to capitalize such costs. Is the corporation subject to any penalties as a result of the failure to capitalize the indirect costs

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