Received goods as payment / income on 1099-NEC. Can I deduct their value when used in business or re-sold?

[malvinchip]

I receive goods as part of a review program. The company that runs the program sends me a 1099-NEC for the estimated tax value (ETV) of all the items I receive. The ETV reported is the full price of the new item. I do this for profit. I have a business which does a variety of things and reviewing and selling online is similar to the other activities my business does.

Some of the items I receive for review I end up using in my business. For example printer toner, a keyboard, a laptop, trash bags, art supplies, lamps for the office, etc.

Some of the items I receive for review, I will resell after I have reviewed them. (In person, on eBay, etc.)

Can I can deduct the value of these items as long as I resell them or use them in my business? If so where in Turbotax / what tax form I should be deducting these?

I was thinking items used in business would be a deduction under supply expense. Then I was thinking items that are resold would be under Cost of Goods Sold (which I think is actually also reported under supply expense since my business is small and I won't be reporting inventory.) If I had purchased the items normally they would be clear business deductions, but I am unsure if receiving the items as payment changes anything?

(Side question: All items I receive for review, even those not used for business purposes, clearly lose value when they are used in my review process. However the review program reports the full, brand new value of the item as my income on the 1099-NEC. Could that also be a factor that might allow for a deduction? )

Thank you for any advice!

[KristinaK]

Yes, your thinking is correct. 

If you use those items 100% for business, then I would deduct them as a business expense. Use the lower of either ETV or the fair market value (FMV). Those could be the same but not necessarily. I would say the FMV is what you can actually sell the items for at that moment. 

If you use them for business only partially, then an allocation between persona and business use is required. 

As to how to report it: office supplies and supplies for the items you've mentioned sound right. 

[malvinchip]

Thanks for the reply!

So for items I re-sell, you are thinking I would only be able to deduct what I actually sell the product for, rather than what was reported on the 1099, which was the item's estimated tax value when I first received it?

In a rare situation where I re-sell the item for more than it was initially valued on the 1099, how would I handle that?