How do we value the gift of a hand painted shoe to a athletic shoe manufacturer to demonstrate our design abilities?

[katadvisor123]

We are a start up, that advertises hand painted wearables.  We purchase clothes, paint the designs and advertise for retail on the internet.   Our athletic shoe designs are listed at $1,200 on the internet.   Recently, created a unique design, applied it to a manufacturer's shoe and gave to the manufacturer to demonstrate our designs.

How should we value this?  Is it marketing? Is it  gift?

[KrisD · Accepted solution]

You can report it as marketing, but you can only deduct what it cost you, not the retail value of your finished product.

If it cost $10.00 in materials to make a product that sells for $200.00, that marketing product's deductible value is $10.00 for you.

If you personally supply the labor, you cannot add the labor in.

If you had employees work on it, you can add in their labor cost to it.