Slow-moving inventory is easy enough to discount or liquidate, but there’s another option that can give your Maine-based business more of a benefit: donate that stock or computer equipment to charity.
In general, when you donate inventory or property used in your business, your write-off is limited to the cost of the items or property. But under a special provision, C corporations can take an additional tax break for donating inventory and computer gear to certain charities. S corporations, partnerships and sole proprietorships are limited to a straight item cost deduction.
A C corporation can deduct the cost of the donated inventory, plus half the difference between the cost and the selling price. The deduction is limited to up to twice the cost of the item under this provision. Another law provides similar tax benefits for donations of computer technology to certain schools.
In some cases, these tax deductions are worth more to a company than what might be gained through liquidation or discounting.
For more details about this tax break, and information on distributing inventory to qualified charities, contact Filler & Associates.