If I'm understanding correctly, inventory starts at 0 your first year as a business. But we have a lot of artwork we previously made before business started, that is available for purchase. Would this artwork be listed as a Capital Contribution? I know I can't put it as inventory in Turbotax until it sells. Right now we had 0 sales last year, so inventory is 0 for beginning and 0 at ending. But on a Balance sheet would this artwork be considered inventory? or something else. I can't seem to conceptually understand how to enter our situation into the software because it doesn't match any of the examples out there. Most start at zero, make purchases, create something, then have an inventory. Thanks in advance for your assistance.
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Your issue is that the inventory contributed probably has a small cost or basis to it. Whatever the basis (or cost to produce) can be added to contributed capital and would be treated as "purchase" of the Cost of Goods Sold area in computing the ending inventory.
"Determining the Basis of Contributed Property to the PartnershipSec. 723 provides that a partnership’s basis in contributed property is generally the contributing partner’s adjusted tax basis in the property, plus any gain the partner recognizes under the investment company rules."
Source: https://www.thetaxadviser.com/issues/2014/apr/casestudy-apr2014-vm.html
Older link, however, rules still apply.
This will give you a basis in the inventory, however, it will probably be low due to you having produced it yourselves.
Your issue is that the inventory contributed probably has a small cost or basis to it. Whatever the basis (or cost to produce) can be added to contributed capital and would be treated as "purchase" of the Cost of Goods Sold area in computing the ending inventory.
"Determining the Basis of Contributed Property to the PartnershipSec. 723 provides that a partnership’s basis in contributed property is generally the contributing partner’s adjusted tax basis in the property, plus any gain the partner recognizes under the investment company rules."
Source: https://www.thetaxadviser.com/issues/2014/apr/casestudy-apr2014-vm.html
Older link, however, rules still apply.
This will give you a basis in the inventory, however, it will probably be low due to you having produced it yourselves.
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