14.12 Business Inventory

Self-employed business owners generally may not deduct more than cost for donations of inventory. If a charitable deduction is claimed, costs incurred in a year prior to the year of donation must be removed from opening inventory and excluded from the cost of goods sold when figuring business gross profit for the year of the contribution.

No contribution deduction is allowed for a gift of merchandise that was produced or acquired in the year donated. Instead, the cost is added to the cost of goods sold to figure gross profit for the year of the contribution. Business deductions are not subject to the percentage limitation applied to donations.