When using the COGS section (Cost of Goods Sold) what you pay for inventory is *not* a deductible expense until the tax year you actually sell that inventory. It does not matter in what year you purchased that inventory either.
So if you are "in fact" using the COGS section to keep track of your inventory, when you close the business you *MUST* show the disposition of any remaining inventory. If you do not sell it before closing the business, then the correct disposition of that inventory is "removed for personal use". That's it.
Removing it from the business for personal use will have absolutely no impact what-so-ever on your tax liability. But if you want to take that inventory you removed for personal use and donate it to a qualified charity, then you can claim that donation as a SCH A itemized deduction. However, if the total of all of your itemized deductions do not exceed your standard deduction, then it will still have "no impact what-so-ever" on your tax liability.
