My wife sells Lularoe. We are quitting it and purchased NO inventory in 2018. Will we pay tax on unsold inventory at the end of the year?

[majungier]

Also most of what we have sold this year has been at cost just to get rid of it. Will we pay taxes on that also if we technically sold it for what we purchased it for?

[TaxGuyBill]

Have you been reporting the purchases under "Inventory" in TurboTax?  Or have you been deducting it elsewhere, such as "Supplies"?

[majungier]

We purchase the inventory from Lularoe so it’s all considered inventory  

[TaxGuyBill]

If you have been reporting it under the Inventory section, you don't receive the deduction for the purchase until it is removed from your business.

That means that if you sell it for the same price as what you paid for it, the income and deduction will be the same, resulting in a $0 profit, and therefore $0 tax.

If you have unsold inventory that you convert to personal use, you need to tell the to the program.  The program won't give you the deduction for the Inventory, but no tax would be due.  So it would essentially mean that you bought the items yourself, with no tax deduction or other tax consequences.

[majungier]

Okay.. not all of it was sold at what we purchased it for so I understand any profit will be taxed. I was more concerned about the inventory that carried over from last year that we still have and whether we would pay taxes on that but sounds like we don’t pay anything on it until it’s sold or removed from inventory for a profit. Thanks for your help

[TaxGuyBill]

Correct, if you have reported it as "Inventory", there will be no tax unless you sell it at a profit.

[mlm3]

If you giveaway your remaining LuLaRoe inventory can you deduct this? Can you take this as a loss and write it off?

[rkjustice]

Did you ever get an answer to this question?  I have about $4600 worth of inventory I am donating and trying to plan how I need to deduct it.

[Critter]

Donations are personal not business ... so the unsold inventory is converted to personal use so the basis is the cost to buy it ... then you can donate it and take a Sch A deduction  if you itemize deductions.  

[Carl]

When using the COGS section (Cost of Goods Sold) what you pay for inventory is *not* a deductible expense until the tax year you actually sell that inventory. It does not matter in what year you purchased that inventory either.
So if you are "in fact" using the COGS section to keep track of your inventory, when you close the business you *MUST* show the disposition of any remaining inventory. If you do not sell it before closing the business, then the correct disposition of that inventory is "removed for personal use". That's it.

Removing it from the business for personal use will have absolutely no impact what-so-ever on your tax liability. But if you want to take that inventory you removed for personal use and donate it to a qualified charity, then you can claim that donation as a SCH A itemized deduction. However, if the total of all of your itemized deductions do not exceed your standard deduction, then it will still have "no impact what-so-ever" on your tax liability.