"That is referring to the Uniform Capitalization Rules mentioned in the paragraph above the statement you quoted."

I guess I'm having a bit of trouble with this distinction. When it says:

"Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities."

I took that to mean that instead of directly expensing a cost that you must add it to COGS. So then when it said:

"This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million."

I thought that might mean that you don't have to bother with COGS.

RB
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No, it means you don't have to follow UNICAP (Code Section 263A) and use one of several acceptable methods for allocating part of cost of goods manufactured AND indirect costs and "mixed service costs" to ending inventory.

Bill