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TerraDea31
New Member

Sale of Inherited Goods

We inherited a warehouse full of my mother-in-law's possessions.  We are paying rent at a storage unit because of the sheer volume of stuff. The goods cost us nothing but we have warehousing costs, which are not deductible unless we claim a value for the inventory.  There are thousands of pieces in this inventory.  There is no way we could determine a value for this stuff.  We have been selling off pieces a little at a time and know how much we have received but are under water with the warehousing costs. I'd like to be able to deduct them. Any suggestions?

8 Replies
Bsch4477
Level 15

Sale of Inherited Goods

You are selling personal items and would only have to report the income if you received more than they were worth when you inherited them. That amount would be the market value at the time of death of the decedent. You cannot deduct a net loss. As a practical matter assume that your income equals the value of the items you received so no income would be reported. Since you are not in the business of selling the items you can’t deduct expenses 

Mike9241
Level 15

Sale of Inherited Goods

if it's costing more to warehouse them than the money received from the sales why not contact some charities to see if they'll take the items as a donation?   possibly you could just stop paying the rent and then likely the landlord can put the stuff out to auction - how long that would have to go on would depend on state law. if you want to do this read your lease carefully to make sure you won't be on the hook.  you might look to sell the stuff to a secondhand dealer. this is really a question of economics.  

TerraDea31
New Member

Sale of Inherited Goods

Thanks for the reply. Actually we are in the business of selling the inherited goods. We have a booth at a local antique mall for which we pay rent as well as a storage unit for all the stuff we inherited. And that’s the problem. My reading is that in order to deduct expenses for storing and selling items we must declare a value for our “inventory”. That’s the current sticking point. Any suggestions?

Bsch4477
Level 15

Sale of Inherited Goods

With assets you inherit, the cost basis is usually equal to the fair market value (FMV)of the property or asset at the time of the decedent's death or when the actual transfer of assets was made.6

 

Fair market value is the price that property or an asset would command in the marketplace, given that there are buyers and sellers who know about the asset and that a reasonable period of time is made available for the transaction to take place.

Hal_Al
Level 15

Sale of Inherited Goods

@TerraDea31 said "My reading is that in order to deduct expenses for storing and selling items we must declare a value for our “inventory”. "

 

That's not true.  Inventory is just one way of determining the "cost of goods sold" (COGS), for a business.

 

Even though you "are in the business of selling the inherited goods", the items inherited from your relative are personal items, and not business inventory.  You cannot deduct any expenses, including storage costs, for the sale of those items.  Since the cost basis, in those personal items is, almost certainly, the same as the amount you sell them for, you do not need to report the sales on your income tax. 

 

If you are going to have to report the sales, because you are going to get a form 1099-k, then you simply report the same amount as your COGS.

TerraDea31
New Member

Sale of Inherited Goods

How are we defining "Personal goods"?  Is there an IRS definition of that or prohibition on a business selling personal goods?  Our COGS is zero, unless we include warehousing and booth space in the cost of those items, which I don't think is legal.  We have hundreds of items from jewelry to furniture, books to 1930's and 40's household items.  Way too much to store in our home, and it would take months to go through everything and determine a value, and it will take months/years to sell it all.  Yes, this is an economics question.  But is there any way to deduct the cost of the storage and/or the booth at the antique mall?  Thanks for your assistance so far.

Bsch4477
Level 15

Sale of Inherited Goods

The IRS defines a business, in part, as an ongoing activity with the purpose of making a profit. Clearly, you can’t make a profit when your cost basis equals your income from your sale. Therefore you are not really a business.  The bright side is that you received the goods for free and you derive tax free income from the sales. I would hope your storage and other expenses are not greater than your income from your sales. If so, you just should have donated the items you didn’t want to keep. 

Hal_Al
Level 15

Sale of Inherited Goods

Your COGS is not zero. It is the same as your "cost basis", which is the fair market value on the date you you inherited them.

 

Q. How are we defining "Personal goods"?

A. Personal property are items you bought for your personal use, including inherted items.

 

Q. Is there an IRS definition of that or prohibition on a business selling personal goods? 

A. There's a prohibition on deducting expenses, effectively creating a business deduction for items that are personal property.

 

Q  But is there any way to deduct the cost of the storage?

A. No.

 

Q. Is there any way to deduct the cost of the the booth at the antique mall?  

A. Yes, if your primary purpose is the sale of business inventory and the personal items are "just along for the ride". But, if you're renting the booth primarily to sell persoan stuff, then no.  But, then there's also no profit from which to deduct expenses (sale of a $1item that has a cost basis of $1 = 0 profit/reportable income).

 

 

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