Paying Taxes on Products Received to Review through Amazon Vine

[mynameismynameandonlymyname]

I was selected to review products through the Amazon Vine program last year. The products they send are considered compensation/income in exchange for the review. However, they do not allow us to sell or give away the items for 6 months. And some of the products are unusable and worth nothing even though they put the estimated tax value (that is inflated) on the 1099-NEC they send. The other issue is that in order to review the product, we have to use the product.

I understand we have to pay income tax on the ETV of the product. I also understand that if we claim this as self-employment income as opposed to hobby income, then we can deduct expenses. What I want to know is can we deduct the ETV of the items themselves as a business expense or loss if the product arrives damaged or unusable and had to be thrown away or disposed of? Also, if we have to use the product up in order to review it, then can we deduct the ETV as a business expense since we no longer have the product due to having to use it to perform the service of reviewing it? Also, can we claim these products as inventory if we are not using the products for personal use?

I am not in any way trying to find any loopholes. I know some Vine reviewers may be doing that. I am trying to figure out the proper way to report inventory, losses, expenses, and income related to being a Vine reviewer so that I am not paying more taxes than I should actually owe. Thanks!

[RobertB4444]

All of the products that you are receiving from Vine are being treated as though Amazon had paid you cash and with your disposable income you chose to purchase their products.

The only way to take the products into inventory is to actively set them up for sale.  Then the inventory value could be the same as the purchase value.

If you received a defective product and could not exchange it or receive a credit to your account for it then you should absolutely deduct it from your income.  Create an expense for "defective product received" or something like that.

Using the product up doesn't create a tax deduction any more than wearing your clothes does.  You use stuff you buy.

@mynameismynameandonlymyname