Poor Inventory Control

[Sherm]

I've done taxes the past 3 years for a small auto dealership. They only sell 3 or 4 cars a year. They closed in 2009. After selling 2 cars and transferring 3 cars to personal use, there is $6,560 of value left in inventory with no vehicles to assign it to. Obviously this is the result of poor bookkeeping. How do I account for this on the Sch C. If I allow it to carry forward from Part III to Part I it results in a loss of $6,560. Is this all I need to do, or do I need to account for it in some other manner.

Thanks

Sherm

[jainen]

>>there is $6,560 of value left in inventory<<

There are any number of possible reasons for the discrepancy. The adjustment on the books should, in my opinion, be in accordance with whichever one is true.

[samingeorgia]

As small as this dealer was, they should be able to come up with what cost they had in each of the cars, whether sold or transferred to personal use. Sometimes, car dealers will spend money on cars in inventory (repairs, detailing, etc.) and this should have been added to the cost of the vehicle. They could have some inventory of supplies, but I doubt that it would be in the amount you quoted.

[10SorTAX]

Sometimes dealers are forced to buy several vehicles in a group, and end up junking unsellable ones. Make sure they didn't sell any for scrap metal.