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Can my client deduct inventory/COGS paid for in 2019 if her business did not open until 2020? She wants to elect cash basis accounting and not track inventory.

sarah4
Level 2
 
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IRonMaN
Level 15

The 2019 purchases are simply 2020 beginning inventory.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

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sarah4
Level 2

She already operated a jewelry business as a sole proprietor, and is opening a separate jewelry business for which she spent $30K on inventory in 2019, but did not start selling until 2020. The businesses will have different trade names. Neither is an LLC but I would put both of them under the same business activity code. If we file both businesses under the same schedule C, can we deduct these costs in 2019?

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IRonMaN
Level 15

As one of my favorite Stones songs says - you can't always get what you want.

You can only deduct when the business is open and when the inventory is sold.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)
sarah4
Level 2

@IRonMaN that’s what I was thinking. What I am hung up on is how to file for 2020 under cash basis if we also have 2019 purchases in there. 

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IRonMaN
Level 15

The 2019 purchases are simply 2020 beginning inventory.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

View solution in original post