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Merlo
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Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Two questions- 1. In 2008 I had the value of my inventory

Resolved Question:

Two questions-

1. In 2008 I had the value of my inventory go down 70% (I am in the copper business) .
If I had say 100.00 in inventory can I write down to $30.00?

2. I had inventory that was damaged/cracking at the end of the year . I was not getting any help from our supplier and I could not sell due to the material being damaged. Can I write this down to scrap value for 2008?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
HelloCustomer

1. You cannot write down the value of your inventory based on current market values. While it may or may not be likely, the market value could go back up again next month or in a few months. Your inventory value remains at what your actual cost was for these products. You do not realize the "mark down" until you actually sell the product, and at that time you will realize a loss when computing your cost of goods sold.

2. If you have damaged inventory which you cannot sell, you will reduce your inventory value by the book cost being carried at the time that you either sell the inventory as scrap or if you otherwise dispose of it. So here again, you do not just write down the value. The loss is realized as a part of your cost of goods sold when you actually dispose of the inventory, either by selling it as scrap or by simply destroying it.

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Thank youCustomer

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