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skm1
Level 2

Started business this year but already owned personal inventory and materials. How do I account for pre-existing inventory? Do I sell it to myself e.g. my new business?

I started my business this year. I have an supply of personal fabric and other materials I am now using in my new business started this year. How do I treat this fabric? Do I sell it to myself this year, or as it is used up in subsequent years?

I also have a sewing machine I now primarily use for my business? How do I manage that expense and maintenance of it if shared with business and personal?

1 Reply
KatrinaB
Intuit Alumni

Started business this year but already owned personal inventory and materials. How do I account for pre-existing inventory? Do I sell it to myself e.g. my new business?

Yes, you will need to receive these inventory items from yourself in your business this year. Please see the IRS Inventory Manufacturing Tax Tips for more info. You can enter this in the Inventory/Cost of Goods Sold Section of your Business section in TurboTax.

 

Yes, you will need to receive these inventory items from yourself in your business this year. Please see the IRS Inventory Manufacturing Tax Tips for more info. You can enter this in the Inventory/Cost of Goods Sold Section of your Business section in TurboTax.

Also, you can report the percentage of business use you have on your sewing machine by reporting it as an asset in your business. You might even qualify to elect to take a Section 179 deduction for this business portion of the asset, meaning that you will not have to depreciate it over a length of years, instead you can take the entire deduction this year. See this article for more info: https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/Managing-Assets/INF12032.html

Then, in Turbo Tax you will report the sewing machine in the Business section under the Business Assets category. Remember to check the box for "No, I have not always used this item for 100% of time for this business." (See Screenshot below.) Then, you can enter in the percentage of time it's used for business and answer the remaining questions to see if you qualify for the Section 179 election. 

[edited, 01/19/17]

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