Tax question for the dealer/collectors out there...

[nearmint]

When filling out a schedule C, the formula for determining "cost of goods sold" is...

 

Beginning inventory + purchases - ending inventory.

 

I get that. But here's my problem...

 

Dealer/collectors have their comics inventory(for sale) and their personal collection(not for sale). But what happens when mid-year, you get a great offer on a book from your personal collection, and sell it?

 

That book wasn't a part of your beginning inventory, so your cost on it is never factored into the "cost of goods sold" formula, and you end up paying taxes on the entire sale price, not just your profit on it.

 

I can't just go back and change my beginning inventory figure to add that book, because beginning inventory is supposed to match last year's ending inventory.

 

I'm sure I'm missing something, but I can't figure out what it is. What do you guys do when faced with that scenario?

[Hammerhead]

I would say leave that book/price out altogether.

[nearmint]

I would say leave that book/price out altogether.

 

Seems like a recipe for disaster. In my case, it's 6 books totaling 20K in sales.

[shadroch]

Push part of the sale into next year.

[nearmint]

Push part of the sale into next year.

 

In that scenario, would I make my cost on the book part of my 2013 ending inventory and 2014 beginning inventory(the books in question were sold out of my personal collection in 2013)?

[G.A.tor]

Simply take your costs in that book and add it into this year's purchases (or year you sold)

[techvoodoo]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

[nearmint]

Simply take your costs in that book and add it into this year's purchases (or year you sold)

 

I'd love to do it that way, but if I ever get audited, aren't they going to frown on me listing a book as purchased in 2013 that I actually purchased in 2005?

[nearmint]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

[techvoodoo]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

 

So you're inventory can't grow through out the course of the year?

[techvoodoo]

My father in law is a CPA if you would like his contact info feel free to PM me.

[nearmint]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

 

So you're inventory can't grow through out the course of the year?

 

It can, but I'm wondering if the IRS will frown on me adding a "purchase" to my inventory that was actually purchased years prior.

[nearmint]

My father in law is a CPA if you would like his contact info feel free to PM me.

 

That's a generous offer. If I don't find the answer I need in this thread, I'll take you up on that.

[techvoodoo]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

 

So you're inventory can't grow through out the course of the year?

 

It can, but I'm wondering if the IRS will frown on me adding a "purchase" to my inventory that was actually purchased years prior.

 

 

It was purchased by you, the person, years prior. Your business can purchase it from you (or anyone else) this year. This assumes you're filing your taxes as a business and not an individual I would imagine. I'm not a CPA I just have one in the family, but I'm pretty sure that's how it would work.

[nearmint]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

 

So you're inventory can't grow through out the course of the year?

 

It can, but I'm wondering if the IRS will frown on me adding a "purchase" to my inventory that was actually purchased years prior.

 

 

It was purchased by you, the person, years prior. Your business can purchase it from you (or anyone else) this year. This assumes you're filing your taxes as a business and not an individual I would imagine. I'm not a CPA I just have one in the family, but I'm pretty sure that's how it would work.

 

That actually makes sense.

[jimjum12]

wouldn't your business purchase the book from your collection, add it to your inventory and then sell it?

 

Add it where? You can't proactively add it to your beginning inventory, because that has to match last year's ending inventory.

 

So you're inventory can't grow through out the course of the year?

 

It can, but I'm wondering if the IRS will frown on me adding a "purchase" to my inventory that was actually purchased years prior.

 

 

It was purchased by you, the person, years prior. Your business can purchase it from you (or anyone else) this year. This assumes you're filing your taxes as a business and not an individual I would imagine. I'm not a CPA I just have one in the family, but I'm pretty sure that's how it would work.

 

That actually makes sense.

 

[G.A.tor]

Jeff, you can sell a book for whatever you want. Add book into inventory at your cost (even 8 yrs earlier). Account for the sales price. Your profit is your profit.

[EC ed]

My instinct is that if it wasn't part of your business, then it doesn't even belong on Schedule C...that is, it was indeed never inventory related to your business. You should/could treat it as disposition of a personally owned collectible, and just figure your gain and report it on your individual taxes as a capital gain using Form 8949/Schedule D...

[nearmint]

Okay, guys, you've given me a couple of options that even sound legal! (thumbs u

 

Thanks!

[keever]

I believe Edowens71 is right. If your long term gain at the collectible rate turns out to be higher than your ordinary income rate if it were the sale of inventory, you might be able to treat it as having been acquired by your business during the year and Gator's suggestion would be "right" for you. I can't say that you have the option of how to report it, but maybe you do. I fear the fee of a cpa or tax attorney to look it up if they don't know it off the top of their head is going to be more than the tax difference. Good luck getting help with this 10 days before D-day.