I’m closing our LLC because we paid for our inventory and that vendor went under so we never got our product. How do we account for the loss?

Forum|Forum|3 years ago
January 17, 2023
11 replies
82 views

We (2 people) started our online retail LLC in 2020 and a QB bookkeeper told us we should be on a cash basis. We purchased our inventory product from a vendor that manufactures everything in Turkey. Due to Covid, earthquakes and such that vendors business went under and our inventory was never sent to us. We prepaid for that inventory and have nothing to show for it. We invested $80,000 for that inventory. How do we account for this loss? This has been a nightmare.

Anonymous_

Level 15

Did you purchase this inventory in the 2020 tax year? Did you file a Form 1065 for that year?

AnaUT22Author

Level 2

We did. And for 2021. Let me add and clarify. The sole investor started the company with $100,000, we paid $85,000 to the vendor in Turkey. Received $5,000 worth of inventory with the other $80,000 to be shipped later but never did because they folded under bankruptcy. In the meantime, we sold what we had and claimed all sales and operating expenses over the 2020 and 2021 tax years. We followed the guidance of our QB bookkeeper doing a cash basis assuming we were going to receive all inventory at the time.

Anonymous_

Level 15

Did you maintain an inventory? It appears as if if did maintain one.

If that is the case, the $80,000 could have been added to Purchases for the tax year in which the payment was made. Was it? That would have increased the firm's COGS and reduced its net profit (perhaps to the point where there was a net loss).