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How is a theft loss of inventory claimed on a sole proprietors

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How is a theft loss of inventory claimed on a sole proprietor's tax return?
Submitted: 1 year ago.
Category: Single Problem
Expert:  levr replied 1 year ago.

Lev :

Hi and welcome to our site!
If there is a theft loss of inventory - generally there are two options.
The first and may be the simplest is to deduct them is by adding the value to the cost of goods sold. For instance if you are a sole proprietor - that amount is reported on Schedule C

Lev :

schedule C, line 39 - http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Lev :

Another way is to report them on IRS Form 4684, Casualties and Thefts. Section B is used for business or income-producing property. - http://www.irs.gov/pub/irs-pdf/f4684.pdf


For losses involving business-use property, refer to Publication 584B, Business Casualty, Disaster, and Theft Loss Workbook. - http://www.irs.gov/pub/irs-pdf/p584b.pdf
JACUSTOMER-5paeefyz- :

something is wrong with this site, the answer keeps repeating its self. But, I got it thanks.

levr,
Category: Single Problem
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Expert:  levr replied 1 year ago.
Sorry for confusion.
I switched to Q&A mode to avoid issues.
Please feel free to ask for clarification as needed.

However - specifically for inventory theft - the first way is preferable.
A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.
While it is not required - having a police report might be very helpful as a supporting document to proof the theft - if you deducting large amount. For small amounts - like retail shoplifting - you may create an internal inventory document.

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