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B
Bullop
April 6, 2025
Question

How to treat inventory when closing?

  • April 6, 2025
  • 1 reply
  • 0 views

I'm looking to close my business at some point, and wanted to know, if I gave my inventory away, not to a charity or , would I have to consider that as personal use? And record it as such? Or could I just zero it or as a loss? I figure it's probably the latter even though I'm giving it away and it's not for personal use at all. 

1 reply

R
RobertB4444
April 7, 2025

Treat it as reducing your inventory to zero.  That creates a business expense for the value of the inventory that you had.  Then you can give it away or throw it away or whatever you have to do to get rid of it.  But your business did spend the money and you aren't going to sell it any more.

 

@Bullop 

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    Rick19744
    Rick19744
    Employee
    April 7, 2025

    As a further comment, make sure you maintain records of how it was disposed:

    • Letter from who you gave it to
    • Picture of inventory in a trash bin

    If audited, the taxpayer will have the burden of proof so maintaining the above documents / records will be key.

    *A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.
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