Tax advice requested

[mdlbear]

This is the first year I've actually had, you know, stuff to sell. I understand the general concepts, but there are a couple of things I could use advice on from somebody who's done it before:

• Inventory: I'm assuming I'm supposed to value unsold inventory at my cost, i.e. (total production cost)/(number of items).
• Promo copies: Do I value promotional and contributor copies at cost, or retail price? Again I'm assuming cost. (I'm not worried about gifts here: those I'm just treating as sales to myself.)
• Anything else you think I need to know?

Comments

[trogula.livejournal.com]

There are actually several different ways to do all of this, and which way is best for you depends on your tax bracket and how other things are structured with your assets and finances. I would highly recommend you consult with a tax accountant, and take their advice.

[angharads-house.livejournal.com]

in both cases, would recommend valuation at cost.

retail price valuation is always risky since it presumes future sales at current retail price: any subsequent discounting or price increase makes your accounting more difficult.

[mdlbear]

That's about what I figured.

[randwolf.livejournal.com]

Cost is probably fine & in fact required if you're using cash accounting: "Your inventories can be valued at cost; cost or market value, whichever is lower; or any other method approved by the IRS. However, you are required to use cost if you are using the cash method of accounting." (Schedule C, line 33 instructions.) Promotional copies, I don't know, but I'd assume cost is allowed.

[mdlbear]

I'm using cash accounting, so cost seems like the only choice. Certainly produces the most reasonable results, too.