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The Tax Man Cometh

Offline Alias300

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Re: The Tax Man Cometh
« Reply #15 on: December 31, 2013, 03:23:59 PM »
And you could only deduct what you paid for it.....not what you have it marked at even if you have it marked at FMV.   

Basically, let's say I find an item at value village mismarked for $1 but it's selling on ebay for $100.
I can only donate and deduct $1, not $100, because that's what I paid for it.
Same applies to storage units.

You'd need to talk to a tax attorney.  Since you own a shop and have already deducted the cost of the unit as a business expense it gets even more tricky.

Search the threads. We had it all broken down last tax season.


Re: The Tax Man Cometh
« Reply #16 on: January 01, 2014, 07:27:29 AM »
I'll have to search out the advice of a tax attorney i guess.. What you're saying makes sense, but I don't know how something like that is traceable. If I buy a shirt on clearance for $2 and I wear it for 2 years, how can I possibly be expected to remember what I paid for it when I donate it?

Offline alloro

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Re: The Tax Man Cometh
« Reply #17 on: January 01, 2014, 02:06:10 PM »
And you could only deduct what you paid for it.....not what you have it marked at even if you have it marked at FMV.

This is only correct for each item valued over $500. For items valued at $500 or less you do not need to declare your cost basis for that item. See form 8283, Part I: http://www.irs.gov/pub/irs-pdf/f8283.pdf

Also, as to not exceeding the cost of the storage unit. You actually can go all the way up to the cost of all units purchased during the year, as well as, all expenses incurred to makes those purchases. Technically, the buying of units is considered a business, and being such anything to do with the IRS is based on the gross yearly income and all expenses to create that income.

Offline Alias300

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Re: The Tax Man Cometh
« Reply #18 on: January 01, 2014, 02:40:52 PM »
This is only correct for each item valued over $5,000. For items valued at $5,000 or less you do not need to declare your cost basis for that item. See form 8283, Part I: http://www.irs.gov/pub/irs-pdf/f8283.pdf

Also, as to not exceeding the cost of the storage unit. You actually can go all the way up to the cost of all units purchased during the year, as well as, all expenses incurred to makes those purchases. Technically, the buying of units is considered a business, and being such anything to do with the IRS is based on the gross yearly income and all expenses to create that income.

Have you read this form?

It's for exactly opposite of what your saying.......


For deductions over $500.
With a section to itemize.  Where you got, your cost, FMV........

............

Now the other part of your post is where I get confused on finding cost of items.
Yes, your correct.   Total cost (unit, gas, dump....) is taken from sales to get AGI.  But I'm not sure how to value items left based on costs.....
I've yet to find any direct formula on calculating this. 

I mean, think about my prior statement on donation can only be what you paid, not what FMV is.
But now, you go to sell business.  They will add up FMV and tax you on the sale....?   Really, the price of business should be calculated on what you paid, but it's not.    Tax law sucks.

Offline alloro

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Re: The Tax Man Cometh
« Reply #19 on: January 01, 2014, 02:50:17 PM »
Have you read this form?
It's for exactly opposite of what your saying.......
For deductions over $500.

Yes I've read it, sorry for the extra zero. Where I put $5,000 I should've put $500. I'll correct the post.

Offline Alias300

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Re: The Tax Man Cometh
« Reply #20 on: January 01, 2014, 03:04:59 PM »
Oh, okay.   So we are saying basically the same thing.   ;D


Why do we even get into this every year?!   It clear none of us understand tax law!    :D

Offline alloro

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Re: The Tax Man Cometh
« Reply #21 on: January 01, 2014, 05:33:09 PM »
Why do we even get into this every year?!   It clear none of us understand tax law! 

We don't understand women, yet we still marry them. :D

Re: The Tax Man Cometh
« Reply #22 on: January 02, 2014, 12:42:53 PM »
So lets say I spent $20 on steel, wheels, spray paint, and welding rod.  I then manufactured a cart that I sell for $100.  Do this all day long as a business...  Now say I donate a cart to a homeless shelter. Can I expense the donation as $20 my cost of materials, or as $100 the value of goods?

When I buy a storage unit, I pay a flat rate for a box full of raw materials.  From that I clean / refurbish / dispose of trash, and do whatever I can to add value and generate sale-able product.  I should be able to value the goods at what I've made them worth.  Just one way of looking at it... 

You could also look at storage unit buying as gambling and put the numbers in as gambling loss / income.  (probably a stretch...)

Offline alloro

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Re: The Tax Man Cometh
« Reply #23 on: January 02, 2014, 01:53:29 PM »
Now say I donate a cart to a homeless shelter. Can I expense the donation as $20 my cost of materials, or as $100 the value of goods?

You would value the donation at $100 since that is the fair market value of the item. Technically since you no longer have the item to sell, you're out the $100 it would've brought in as income.

Offline Alias300

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Re: The Tax Man Cometh
« Reply #24 on: January 02, 2014, 05:13:22 PM »
I'd write of the FMV of the cart because you've changed the item.  Raw goods to usable item.

I repair copper cookware.  If I was to donate one its no longer the the same item.  I've improved it. I've put time and labor and money into it......I'd right of new FMV, not cost of pan.



And no.  You can't get away with it as a gambling loss because it's not a game of chance.  Your guaranteed to get what your looking at.   Like you can't write of betting on a pool.  It's considered a game of skill, not chance.  Nice try though.    ;D

Re: The Tax Man Cometh
« Reply #25 on: January 03, 2014, 10:05:22 AM »
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV? Seems to me, that would be the most logical..

Offline alloro

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Re: The Tax Man Cometh
« Reply #26 on: January 03, 2014, 10:15:01 AM »
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV?

Yes you would.

Offline Alias300

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Re: The Tax Man Cometh
« Reply #27 on: January 03, 2014, 06:42:52 PM »
But if I buy a locker as inventory for my store and donate the items that sit for a while, would I not be able to write off FMV? Seems to me, that would be the most logical..

If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it OR its basis (http://www.irs.gov/pub/irs-pdf/p551.pdf) . The basis of contributed inventory is any cost incur­ red for the inventory in an earlier year that you would otherwise include in your opening inven­ tory for the year of the contribution. You must remove the amount of your charitable contribu­ tion deduction from your opening inventory. It is not part of the cost of goods sold.
If the cost of donated inventory is not inclu­ ded in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Treat the inventory's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.


http://www.irs.gov/pub/irs-pdf/p526.pdf




The way I read the law, and I'm not a tax lawyer or CPA, I'd say no.
I can't go to the east coast and buy a 100 Amish chairs that are common there for $1/ea, bring them here where they sell for $10  then donate them and say there is $1000 donation.  Take $150 (15% bracket) off my taxes.    The government isn't there to buy your sh*t that doesn't sell....

Here is some related info......because a lot of it comes down to how much you donate:
http://www.hrblock.com/free-tax-tips-calculators/tax-help-articles/Estates,-Trusts,-and-Gifts/Charitable-Donations.html?action=ga&aid=27166&out=vm

Offline Alias300

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Re: The Tax Man Cometh
« Reply #28 on: January 03, 2014, 07:18:24 PM »
My head hurts.
Reading IRS tax codes is like putting together a giant jigsaw puzzle that forms a riddle that gives you a clue on where to find the next jigsaw puzzle......

Offline alloro

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Re: The Tax Man Cometh
« Reply #29 on: January 04, 2014, 10:52:24 AM »
The government isn't there to buy your sh*t that doesn't sell....

They're not buying it, they are only allowing the tax deduction on it. Meaning that if a $100 item is donated you take $100 off your income, you do not take $100 off your tax bill. If your overall taxes are about 15% then the government is giving up $15 not $100.


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