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.
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.
As a further comment, make sure you maintain records of how it was disposed:
If audited, the taxpayer will have the burden of proof so maintaining the above documents / records will be key.
So I would not need you record it as " for personal use" if I just got rid of it one way or another? As stated above just given away or a picture of leaving it in with others when I move out of the state?
All you need to do is show the ending inventory as $0 in the year you end the business. Your cost of good sold is your beginning inventory, plus purchases, less your ending inventory. So the missing inventory will be entered as cost of goods sold on your final business return.
I get the part about setting your ending now-obsolete inventory to $0.
When TurboTax asks "Do you have any of these other business situations?", one choice is "During 2024, I disposed of nondepreciable business assets ......", and when I click the "Learn More" link, it mentions INVENTORY as one of the examples.
Should I select this option? I assume I'll simply discard the obsolete inventory. I have no reason to try SELLING the inventory, so any subsequent screens asking about an inventory SALE should be ignored, YES??
THANKS!