@DianeW777 wrote:
No, if the consignment shop is operated as a sole proprietor or a partnership. This would go on the personal side of the tax return under charitable donations.
Yes, if the consignment shop is operated as a C or S Corporation.
There is no cost to purchase the consignment items, therefore the books journal entry would be a credit (increase) to capital and debit (increase) to inventory.
When items become the property of the consignment shop for free (at the end of the consignment period), is that taxable income to the shop at the property's FMV? Seems like that should be so if "found" property is taxable income.
https://turbotax.intuit.com/tax-tips/general/what-to-know-about-taxes-on-found-property/L9BfdKz7N
If the property is included in taxable income, then it has a basis and can be donated, however, the rule about inventory in publication 526 would still seem to apply. The tax "deduction" is that fact that you recorded cost of inventory but no sales proceeds. If the consignment shop does not include the FMV of consigned property as income, the taxpayer has no basis in the property and gets no donation value. I don't see any circumstance where consigned property generates a tax deduction except when the property was declared as taxable income in a previous year and included in the opening inventory with a cost basis, per page 10 of publication 526. https://www.irs.gov/pub/irs-pdf/p526.pdf
