The US Supreme Court decided this issue in 1979 in Thor Power Tool Co. vs The Commissioner. In summary, the Court ruled that a deduction for the write down of obsolete inventory will only be allowed if the inventory is physically disposed of. They also said that generally accepted accounting principles regarding these writedowns had nothing to do with the tax accounting. If memory serves me correctly, the deduction will be allowed if the inventory is physically disposed of within 30 days after the writedown. But you should check this out with your tax advisor to be sure my memory is correct.
