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how is your business structured - sole proprietorship or single member LLC, S-Corp, C-Corp, partnership? does the business expense the purchases of product or does it account for them as inventory.?
June 1, 2019 9:55 AM New MemberIt was a single member, inventory was carried and we did not deduct that amount on our taxes. A previous discussion with a tax specialist I was 99% there, but am unable to get back to them to complete my case number. Thanks for the response.
If a disregarded entity that is reported on schedule C, you and the business are the same; it's money and property are your money and property. If you did not deduct the cost of inventory as a business expense, then you can deduct the donation as a schedule A itemized deduction (but remembering the requirement for an appraisal and a signed form 8283).
However, it may still be to your advantage to deduct the costs as inventory on schedule C rather than as a charity deduction on schedule A. If you deduct the full inventory cost on schedule C, you may show a net operating loss for your business; that may be deductible against other income now or in the future. Your schedule A itemized deduction will be limited by the fact that the standard deduction has doubled ($12,000 single, $24,000 married filing jointly) so your only benefit comes from the amount that your itemized deductions are more than the standard deduction.
You may want to run the situation past a tax professional (not a storefront seasonal tax preparer.)
June 1, 2019 9:55 AMConsidering this purely as a charity deduction:
First: your maximum deduction value is the fair market value of the good or your cost basis , whichever is lower . Normally, in the ordinary course of business, you deduct the cost of goods sold as a business expense. This means the cost of your inventory has already been deducted, and it has no tax value as a further charity deduction. See "ordinary income property" here. https://www.irs.gov/pub/irs-pdf/p526.pdf
You can't take two deductions for the value of the same property.
If, for some reason, you never deducted the cost of goods as a business expense, you may be able to deduct your cost or the fair market value (whichever is lower) as a donation to charity. However, for donations of property (items, anything not money) over $5000 for any single item or group of similar items, you must have a signed appraisal, and the appraiser and a financially responsible person at the charity must sign a copy of form 8283 describing the donation. You can e-file the form 8283 along with your tax return but must then mail the original signed paper to the IRS within 5 days.
This would be unusual, and I suspect you have no donation value. If this was a multi-person LLC or partnership or S-corp, you can't just take all the inventory for yourself without additional consequences and responsibilities to the other shareholders or partners.
