It depends. Did you have any sales and did you report these in Schedule C? If so, let's break this down. Assuming If you haven't sold any products during the year and then Mary Kay buys back your products at 90% of its value, it's a sale.
Let's assume you purchased $40,000 worth of inventory and have no inventory at the end of the year. You would record $36,000 as a sale in Schedule C because this is 90% of your inventory that was bought back.
Now go to cost of goods sold. Record your beginning inventory at $40,000 and ending inventory as zero. What is reported in your Schedule C is a business loss for the 10% value of the inventory that wasn't reimbursed to you.
This is an oversimplification that I have stated because you may have other income that was reported in your Schedule C. The point is, however, that the loss of the value of your inventory is reflected as a loss in your Schedule C.
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