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chromecaster
01-28-2014, 07:13 PM
Hey guys, new to business and new to this forum!

I sell collectibles, they gain value through the years. Recently, I decided to make it a business. So my inventory is a mixture of new goods and personal goods that were bought a long time ago. What do you do when you sell something that was purchased so long ago that you have no receipt for it? But you do recall how much it cost you.

Can you still deduct base on memory, or is this a case of in which I should not deduct? Say I sold for $600, and I bought for $300. I don't have the $300 receipt, but what if I can show advertisements for that piece that showed it was $300 when it was first in the market?

So basically, what I like to know is... are we proving "WE" bought it? Or, are we proving its value? Because like I said, through advertisements, internet links, I can prove what they cost a long time ago.

But if I have to prove that I actually bought it through receipts, then that'll be hard. Please advise, thank you for your time.

Grumpster
01-29-2014, 11:38 AM
This question depends a lot on where you live. Since you're using the dollar sign I'm assuming you live in America, so you're best of consulting local laws as I know things can vary a lot on a state-by-state basis in the US. Here in the UK, you generally have to prove what you paid for it, and if you can't, then you're running a thin line. I think it depends on the taxmans mood on the day when he reviews you as to whether or not you get called out on not having receipts and stuff. Unfortunately receipts are a necessity for tax purposes now. My only advice to you would be to ensure you get receipts for anything else you purchase. It may also be an idea to let us know what state you're from so that anyone else with a better knowledge of the US tax system may be able to find the relevant information for you. :)

cpefley
01-29-2014, 03:07 PM
If you don't have a receipt, you probably just use an appraised price or the item. You could say that it cost $300 and no one would probably ask questions. You can call the IRS too, if you aren't sure. They offer free advice.

LindaKay
01-29-2014, 03:27 PM
I agree -- the appraised value of the item should suffice. You probably won't need this information unless you get audited, which is pretty rare, but you need to be prepared for it just in case.

chromecaster
01-29-2014, 04:57 PM
Thanks guys! Okay, next question is anybody familiar with the California Board of Equalization?

I'm in CALI, and I have to do the 401 return for the sales tax that I collected. Under deductions, I'm not clear how to handles this versus the actual Income filing later in April. This 401 return for the Board of Equalization, do I just deduct each actual collectible I sold?

The COGS formula is used for the April income tax, right? Which is the aggregate of inventory at the beginning of the year, inventory bought during the year, and inventory at the end of the year. This formula is not used for the 401, is it?

Auror
01-29-2014, 05:34 PM
Well, what about a sales record? Do you have that? If so, then you could just compute the cost of sales based on the percentage of markup that you put on the product and inform the tax authorities.

Still, it is still much better that you have a receipt or a supporting document for every business transaction that transpires. Having incomplete records would come back and haunt you later that's for sure.

karmaskeeper
02-17-2014, 01:52 AM
When you're a small business owner . As far as filing taxes what can you use for deductions? I'm really interested in starting a business from home. Would like some advice about the taxation of a small business owner.

fredkawig
02-17-2014, 07:06 AM
That's a hard one. Yes you can present your product still even without the receipt as long as you can prove that that was the worth of the item that you sold. You could file an affidavit that states that you bought it at that amount and have it notarized by an attorney.

CSomm
02-27-2014, 01:14 PM
First off, you don't need anything unless they choose to audit you. If they do, any of the things described by the above posters (appraisal, original sale price, etc) will mostly likely work as long as you are showing a good faith effort to responsibly report---you deal in a business that doesn't necessarily involve the most innovative record-keeping, and I doubt that they'll come after you for being unable to provide the print receipt for every single item.

soopersonic
03-03-2014, 10:01 PM
Great question! The answer depends on where you live. It is essentially personal property prior to the start of your business. So you would assign a value to the item, then you could list it as a business inventory item, with a corresponding debit to the Owner's Equity Journal. That way you can get around the receipt issue, as you aren't trying to recover the original cost per se, but it is a non-cash contribution to your business.