Basically, what you pay for inventory is not deductible until the tax year you actually sell that inventory. Doesn't matter if you purchased it 50 years ago. The section for Inventory/Cost of Goods Sold (COGS) takes care of this for you.
Just understand that for your first year of business, the BOY (Beginning of Year) Inventory value *MUST* be zero, no matter what. Here's some examples of how COGS works.
BOY Inventory - $0
COGS - $1000 (What *YOU* paid for the inventory you actually sold in the tax year)
EOY Inventory - $4000 (What *YOU* paid for the inventory still in your possession on Dec 31 of the tax year.)
The above indicates that on Jan 1 of the tax year you had $0 inventory. Then you sold $1000 of that inventory leaving an EOY Inventory balance of $4000. So overall in the tax year you purchased $5000 of inventory. You get to deduct the $1000 you paid for the inventory you sold.
2nd year of business:
BOY Inventory - $4000 (this *MUST* match your prior year's EOY inventory balance.)
COGS - $2000 (What "YOU" paid for the inventory sold during the tax year)
EOY Inventory - $3000 (What *YOU* paid for inventory in your possession on Dec 31 of the tax year)
The above indicates you started the year with $4000 of inventory, sold $2000 of inventory and ended the tax year with $3000 of inventory. Simple math indicates that you purchased an additional $1000 of inventory during that tax year, that you did not sell yet. You only get to deduct $2000 for the inventory you actually sold during the tax year.
