I plan to write down some obsolete inventory by taking it out of inventory and letting the expense flow through COGS. My question is do I have to physically remove, donate, destroy the inventory to write it off or can I keep it and hope to sell it in the future. We are an S Corporation. Also, can you point me to the IRS publication that addresses this issue. Thanks!
You'll need to sign in or create an account to connect with an expert.
The US Supreme Court decided this issue in 1979 in Thor Power Tool Co. vs The Commissioner. In summary, the Court ruled that a deduction for the write down of obsolete inventory will only be allowed if the inventory is physically disposed of. They also said that generally accepted accounting principles regarding these writedowns had nothing to do with the tax accounting. If memory serves me correctly, the deduction will be allowed if the inventory is physically disposed of within 30 days after the writedown. But you should check this out with your tax advisor to be sure my memory is correct.
The US Supreme Court decided this issue in 1979 in Thor Power Tool Co. vs The Commissioner. In summary, the Court ruled that a deduction for the write down of obsolete inventory will only be allowed if the inventory is physically disposed of. They also said that generally accepted accounting principles regarding these writedowns had nothing to do with the tax accounting. If memory serves me correctly, the deduction will be allowed if the inventory is physically disposed of within 30 days after the writedown. But you should check this out with your tax advisor to be sure my memory is correct.
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
cvoegtli
New Member
Guavalord54
Level 2
gowrish
New Member
stanleytady
New Member
TK2005
Level 1
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.