Federal Tax Research 10th Edition by Steven Gill, Gerald Whittenburg, Roby Sawyers, Debra Sanders, William Raabe

Exercise 86

Your client, Mustang Racing Parts Inc. (MRP), is engaged in the production, transmission, distribution, and sale of racing headers for Ford Mustangs (inventory property). The client is also involved in the distribution of other racing parts manufactured by other suppliers (inventory property). During the tax year, MRP produces numerous identical dies and molds using standardized designs and assembly line techniques (noninventory property). The dies and molds are mass-produced. MRP uses the dies and molds to produce particular automobile racing components and does not hold them for sale. The dies and molds have a three-year recovery period for purposes of I.R.C. § 168(c). The client wants to know if it can elect to use the "simplified service cost method" to calculate the amount capitalized under § 263A on the dies and molds.
a. Locate the IRS letter ruling that deals with this situation. State the letter ruling number.
b. Review the IRS letter ruling. Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this IRS letter ruling If so, what is your conclusion(s)