Thanks so much for your input. Yes, I am paying estimated tax on this income.
I did not clarify well - though these items lose value quickly, they are for the most part all expected to last more than a year, and they do have a determinable value, and they are used in the business to produce income, because I must evaluate them to be paid.
Also, I do not technically fully own the items until 6 months after I receive them. I am allowed to dispose of them if they prove to be worthless, but cannot give them away or sell them. Though I may use the in the interim, they are not mine for 6 months.
What do these lines mean in the IRS publication 946? I am not totally satisfied that these items were not "purchased" since I do have to pay with my time spent testing, putting items together, and reviewing, especially since IRS Topic 703, Basis of Assets, mentions cost as including services.
From IRS 946, page 17:
".....your property must have been acquired by purchase. For example, property acquired by gift or inheritance does not qualify.
Property is not considered acquired by purchase in the following situations.
1. It is acquired by one component member of a control-led group from another component member of the same group.
2. Its basis is determined .... In whole or in part by its adjusted basis in the hands of the person from whom it was acquired"
My property is very definitely not a gift or inheritance - I must work for it. But do one of the other two items apply? I don't know what they mean, and I need to understand those sentences before I will be fully satisifed that my items were not purchased with the cost of my services. Not trying to be difficult at all, just need to feel like I really understand what the IRS considers a purchase. Thanks so much!
