Qualifying Production Property?

[JoshinNC]

Does the following activity qualify for DPAD?

Client is in the business of selling refurbished telecommunications equipment. They buy used equipment, refurbish it (some in house, some by subs) and then resell it. TTB says that domestic production gross receipts are reciepts from the sale of QPP manufactured or produced within the US. Is this considered production of property for these purposes?

[fliszt]

I thought

that "production" was manufacturing something from stage 1 to end, and that refurbishing was a type "repair".

[sandysea]

I think this COULD qualify....

In my understanding of your post, you are taking almost raw materials at this point and re producing them for use...in the current state that you receive the inventory, I am assuming it is not ready for resale, so you have to do some manufacturing of it in order to get it ready for resale....

I may be a little proactive here, but raw materials are indeed produced by someone else and the user (let's say a cabinet shop who buys precut finished lumber) can still take the credit as they have COGS in their reassembling the product for resale....

I will let others quantify this, but indeed I think you are in the business of producing goods that would qualify for the credit....

[ChEAr$]

Refurbishing

is not production.

[Snaggletooth]

Link Chain

I don't have an answer, and the Feds have poorly written this one -- leaving all manner of interpretations at every step along the way.

I see a problem in that our economy often has 15 members in its supply chain - from mining, manufacturing, distribution, retailing, etc. As I understand it, if there are multiple levels of manufacturing, including some distributors who may also be assemblers, EACH is entitled to this deduction.

They're (Feds) are going to have to fix this.

[sandysea]

My point exactly Snaggle

It is not clear what "defines" QDPA...let alone what is allowed in it. I think that if they are in the process of having COGS in the arena of distribution of a product or installation ( if not cosmetic) then this can be allowed. May see some revenue rulings soon on the issue

[theresa d]

cgs

I think the issue that the supply chain could include many separate entities each entitled to the deduction is resolved due to the need to deduct cgs, anong other expenses, from QPAI . in effect each entity is receiving the deduction on a net figure which excludes the cost that other entities would have received the deduction on.