Cost Method To Value inventory

Forum|Forum|3 years ago
August 17, 2022
2 replies
1 view

So I used the Cost Method to value End of Year inventory, which turbo tax states that it is common to use the amounts I actually paid for the good at wholesale. For example, if I were to pay for 10 stuffies at $10 each ($100 Total) for 2022 and only sold 5 of them, I will report End of Year Inventory Value of $50 for the 5 that I did not sell.

My question is, what if I acquired 100 books for free from Facebook and sold 50 of them in 2022 at varying prices. I'm left with 50 books. In order to be consistent with how I reported the first example as I also did last year (Cost Method), do I report $0 since they were free to me?

Not A Product Question

Best answer by Anonymous_

If the books cost you nothing (including transportation costs), then that would be your cost.

However, if you could show the books were gifts, then you could use the donor's basis (assuming the donor knows their basis).

Mike9241

Level 15

how did you acquire the books or what did you do to get them for free?

jpech2005Author

Level 2

They're from a FB user that posted them for free. Drove my vehicle 20 minutes to go pick them up. Sold some and the rest were unsold, but sold the next year.

Carl

Level 11

In a nutshell, the cost basis of the books is $0. What that means is that when you report the sale of any of those books, whatever you sell them for will be 100% profit. (As to what's taxable, that depends on other business expenses you may have that may or may not be at all related to those books or their acquisition.)