I understand that, but was trying to simplify it a little. Here is my calculations which are just examples. I am comparing two years with only difference is the inventory at the end of the year.
Year 2020:
Gross Income $4,000,000
BOY $150,000
COGS $3,000,000
EOY $150,000
After all other deductions, taxes owed is $163,000
Year 2021:
Gross Income $4,000,000
BOY $150,000
COGS $3,000,000
EOY $400,000
After all other deductions, taxes owed is $290,000
So as you can see the only thing that changed from 2020 to 2021 was my EOY inventory which was $350,000 more and my taxes owed went up over $100,000 because of the increase in inventory.
