We are closing our online business and still have $24,000 worth of inventory that was purchased in prior years. We have been unable to sell it, even at a price of $4,000. What can I do with it? Can I sell it for $100 and then just include the $100 income on my taxes and take the loss? Can I donate it to charity? The business is an LLC and we file schedule A. Our goal is to have the ending inventory be zero and be able to claim the cost of goods sold on the taxes, resulting in a loss for the year. We track inventory by listing the inventory at the beginning of the year and the end, and the difference is cost of goods sold.
You'll need to sign in or create an account to connect with an expert.
There is no tax requirement that you try to maximize your profit or minimize your loss, so if you can sell it for $100, you would report that. You could even destroy it and mark it as destroyed with zero dollars raised.
Depending on how the business is set up, there might be tax value in donating the inventory to charity. The value of the donation would be the cost basis, or the fair market value on the day of the donation, whichever is lower. Because you are having such a hard time selling the inventory at an 80% markdown, you might have trouble claiming much for the FMV of the donation. I don't know if would be better for you to claim a loss on schedule C or a donation on schedule A.
Let me raise a concern I just noticed hidden in your question.
"We" are closing our business" and "The business is an LLC."
Unless you meet a very specific condition, an LLC with more than one owner must file a partnership tax return form 1065, not a personal tax return with schedule C. Each partner gets a K-1 that goes on their personal return. The specific exception is that, if you live in a community property state and the only two LLC members are spouses, you file two schedule Cs, one in the name of each spouse, each reporting half the income and half the expenses.
I hope that your use of "we" was just inexact--this business is owned by only one person. If you are married, you used the word "we" incorrectly and your spouse is not an owner. If she participates materially in the conduct of the business, she is either an independent subcontractor or an employee.
If "we" means you and your spouse, and you both materially participated in the business, and you are not in a community property state (or "we" means you and any other person not your spouse), then you need to be filing form 1065 and if you have not, you need to see an accountant right away. The penalty for failing to file form 1065 is $195 per month per partner from the date it was due.
Sorry for the incorrect language. My husband is the sole owner of the LLC.
It will definitely generate a NOL.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
momeebee
New Member
Cargomarlock
New Member
myamica03
New Member
TaxInTaxOut
New Member
sd847
New Member
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.