How long do I claim inventory!

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seymour

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toledo,ohio
Hi. The tax man wants my numbers!!!(if you know what I mean). I have some inventory on the walls that have been there a few yrs. I have put them in my books and Sch. C for the last few yrs. How long do I need to claim inventory according to the tax man????????
 
You either keep it or throw it out (literally) and charge it out of stock. This is called a markdown and or charge out.

There is no set time limits.
 
Seymour,

If depreciation has taken its course, you wouldn't show any $$$ attached to that inventory, more than likely. What does your accountant suggest, or is that who is asking?

Gustopher
 
I've never heard of depreciating inventory. Depreciation is normally for office equipment, store equipment vehicles, etc.

You value the inventory at your cost either on a LIFO (Last in first out), FIFO (First in first out), average cost or actual cost basis. If you framed the artwork, the work would be valued at the cost of the artwork plus your value added in the frame. The value added would be your cost of materials plus cost of labor. There is no depreciation. You can devalue the inventory, but only at its selling price. You can throw it in the dumpster to eliminate it from the inventory or donate it to charity at its cost or market value whichever is LOWER.

Just be glad you are not in the neighboring state to your west (Indiana) which still has the ridiculous "personal property tax"...read "INVENTORY TAX". In days gone by an assessor would actually go into your home and record your personal property, i.e., # of bathrooms, TV sets, swimming pool, artwork on your walls, etc. You would then be taxed on the value of your personal property. Of course Hoosiers eventually stood up against this tax and it was eliminated for individuals, but remained for businesses.

If an Indiana gallery had a painting in stock for X number of years, (I believe the number was somewhere around 12 years) you actually would pay more in taxes than your cost of goods!

Of course, you still had a state income tax also. If you took the money and put it in the bank or took it out of the company as personal income, you paid less taxes than if you put your profits back into inventory attempting to better serve your customers.

I'm glad I now live to the north in the beautiful Great Lakes State of Michigan.

Dave Makielski
 
I have taken inventory off the books and kept it just in case in the attic. When someone does buy it you get a double write off.
 
Originally posted by srolfe:
I have taken inventory off the books and kept it just in case in the attic. When someone does buy it you get a double write off.
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No, since you now have $0.00 as cost the selling price will be 100% profit, and you will pay taxes on that 100% profit.

BTY, by keeping the charged out inventory might be considered "TAX EVASION" by a tax auditor.
 
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