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smallbiz-hawaii
02-21-2014, 03:13 AM
Aloha!

I am located here in Hawaii, USA; my question is, can a business deduct an intentional loss on a product. Let's say that I purchase a product from a local distributor for $10.00; I turn around, out the door, and sell it for $5.00 to stay ahead of the competition. Can I deduct the loss of $5.00?

Thanks!

CSomm
02-27-2014, 01:11 PM
It doesn't matter to the government that you intended to do it---it will show up on your Profit and Loss statement as a loss. Losses are deductible---I think perhaps you may be overthinking this. If you have to sell your product at a loss, the government cannot see that you've made profit (you haven't) and won't be able to tax it.

alec
02-28-2014, 02:05 AM
Interesting question. I'd say that since you get no profit because you sell at a loss, and tax is based on income, you should be able to deduct it.
Now with that being said I still think it's safe to consult a professional and inquire with the local authorities since laws may be in place regarding this.

So yes, I agree with CSomm above!

soopersonic
03-07-2014, 02:11 PM
Of course you can! The "intention" doesn't matter, it's the proper accounting of the amounts that does. Grocery stores do this all the time, it's called a loss leader. Milk and diapers are common items, you price your milk the cheapest in town to get people in the door, and they buy other stuff while they are there, which is where you get the profit.

cpefley
03-08-2014, 05:23 PM
It doesn't matter to the government that you intended to do it---it will show up on your Profit and Loss statement as a loss. Losses are deductible---I think perhaps you may be overthinking this. If you have to sell your product at a loss, the government cannot see that you've made profit (you haven't) and won't be able to tax it.

I agree, a loss is a loss, and it will be on your Profit and Loss, so you can definitely deduct it. Where does the the international part come into play? You said it was from a local distributor in Hawaii, that means that it is in the US. Did you sell it overseas?

Jessi
03-08-2014, 06:25 PM
Absolutely!

Others have already explained why, but here's another example.... This is the same logic behind a company might give employee's an extra bonus at the end of the year. It sometimes will push them into a lower tax bracket because it decreases their overall profit (or could push them into showing a loss even). It's why a company might go ahead and purchase a new car that counts as a business expense that may push them into a loss.

idlecuriosities
03-09-2014, 11:48 PM
Everyone else has pretty much covered that this is an acceptable practice. I would just like to add that I like your outside the box thinking! Gotta get a leg up wherever you can.