Custom Manufacturer?

[Unregistered]

What test do you apply to determine if a manufacturer would be classified as "custom" under Rev. Proc. 2002-28. One of the examples given states that if a manufacturer builds anything other than a prototype for a customer they are not considered custom. I could really use an answer from someone who has experienced this issue before. I think I remember reading a post from someone who addressed this issue during an audit. What test did the auditor use?

Thanks in advance.

[geekgirldany]

Can you give any details in what the company manufactures?

I am the one that posted about the custom manufacturer. Its a very thin grey line. Here is a link to the CPA Journal that gives more information on additional court cases on the custom manufacturer question:

http://www.nysscpa.org/cpajournal/2001/0800/features/f083201.htm

The very last case is a great example. Sometimes you have to go by court cases and the examples given in the Rev Proc. or Sec Codes. I had to Google alot to find information on the custom manufacturers.

[Unregistered]

custom

I'll review the link.

The client manufactures commercial light fixtures for use in manufacturing, retail and distribution center type facilities. They keep no finished goods inventory on hand, as each "run" of product is built to the specific requirements of the job in which the lighting will be used.

Ex: Coca-Cola builds a new bottling facility. They contact my client who then sends out a salesman and designer to look at the blueprints for the facility. The designer goes back to the office and designs a light fixture specifically for use in that facility to meet the customer's needs. The finished material could not be used anywhere else, as it would not fit the design of any other facility.

This sounds "custom" to me, but I just want to look at what the IRS has used as a definition previously.

Thanks for your help!

[geekgirldany]

Yeah that sounds custom to me also. My client did custom cabinets. The customer picked out the style and design. He bought the material on a as need basis. Kept little inventory like scrap wood pieces.

The way you described... especially that it could not be used on another job sounds custom to me.