I can't help with the goodwill stuff.Hopefully someone else will jump in here for that part.
The inventory balance, commonly referred to as the Beginning of Year Inventory, or BOY inventory, is the cost of what "YOU" paid for that inventory. But understand that inventory is not a deduction in any way, shape or form until the tax year you actually sell that inventory. It flat out does not matter in what tax year that inventory was purchased either. So you must subtract what you paid for that inventory (or what you value it at) from your overall total cost of your purchase price for the business.
Now with no exceptions, your BOY Inventory balance *MUST* be ZERO. Again, there are no exceptions. Here's a scenario of how the Inventory (COGS) works.
- Lets assume you paid $100,000 for the business in total, of which $10,000 of that was for inventory. That makes your total (adjusted) purchase price $90,000. Now lets deal with the inventory in the Cost of Goods Sold (COGS) section of the program.
BOY Inventory (Beginning of Year Inventory) - This is what *YOU* paid for the inventory in your physical possession on Jan 1 of the tax year. Since you didn't own the business on Jan 1 of 2019 your BOY Inventory balance is ZERO.
EOY Inventory (End of Year Inventory) - This is what "YOU" paid for the inventory in your physical possession on Dec 31 of the tax year.
Cost of Goods Sold (COGS) - This is what "YOU" paid for the inventory that you "actually sold" during the tax year.
So lets assume upon your purhcase of the business in March 2019, you have 10,000 widgets of which you valued at $10,000, or $1 per widget. During the year you sold 4000 of those widgets. Here's how it looks.
BOY Inventory - $0
COGS - $4,000
EOY Inventory - $6000
The above shows that you had no inventory in your physical possession on Jan 1 of 2019. Then during the tax year you sold 4000 widgets leaving you with an EOY Invenotry balance of $6000.
Now if you sold those 4000 widgets for $5 each, that means you made $20,000 gross income on your sales. You subtract the $4,000 you paid for those widgets from your gross income of $20,000 and you have $16,000 of taxable income. (The program does all this math "for you")
Here's another scenario using the same valuations:
BOY Inventory Balance - $0
COGS - $4000
EOY Inventory Balance $8000
The above shows you started the business year with no inventory. During the year you sold 4000 widgets which *YOU* paid $4000 for. Now you would expect the EOY balance to be $6000. However, during the same year you purchased an additional 2000 widgets at $1 each, leaving you with an EOY balance of $8000.
So can you see how inventory works now? WIth inventory, it *does* *not* *matter* in what tax year you purchased it. What *you* paid for that inventory is not deductible until the tax year you actually sell it.
For the equipment, you will enter each piece of equipment in the business assets section. It gets depreciated over time. How much time depends on the classification of the equipment. For example, vehicular assets are generally depreciated over 5 years, while a business real estate structure is depreciated over 39 or 40 years.
Now it's perfectly possible for equipment to qualify for the SEC 179 deduction or the Special Depreciation Allowance.
SEC 179 - This allows you to depreciate the entire cost of qualifying equipment in the first year of business. This is not advisable if the business does not have the *taxable* income to claim that depreciation against, as it *does* *not* *help* on the tax liability front if the business does not have the taxable income to claim it against.
Special Depreciation Allowance - This allows you to depreciate a maximum of 50% of what you paid for qualifying equipment in the first year. But again, this is not advisable if the business does not have the *taxable* income to claim that depreciation against, as it *does* *not* *help* on the tax liability front if the business does not have the taxable income to claim it against.
Also, if there's any possibility that you will be selling or closing the business before all equipment has reached it's useful life for depreciation, taking the SEC 179 or SDA has the potential to hurt you at tax time in the year you sell, close or otherwise dispose of the business.
Remember, you are required to depreciate business assets by law. Then in the year you sell, close or dispose of the business you are required to recapture all prior depreciation taken and pay taxes on it. In the end, that recaptured depreciation gets added to your AGI and has the potential to put you in the next higher tax bracket. So while you may "benefit" in the short term with the SEC 179 and/or SDA depreciation deductions, changes are they will hurt you tax-wise in the end.
