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Financial Planning / Tax Strategies


Subject:  Re: Inventory is income? Date:  9/23/2012  9:35 PM
Author:  aj485 Number:  116655 of 123001

A poster says that increases in inventory are taxable as income, but I've never heard of such a thing. From what I understand, inventory is simply an exchange of one current asset (cash) for another (goods.

I don't read it the way you did. What I read it as is the expenses that can be deducted are only the expenses of the goods that have actually been sold. Thus, the costs associated with goods in inventory (i.e. not yet sold) is not yet deductible. So, it's not so much that the increase in inventory is taxable income, it's that the income that was spent to increase the inventory doesn't have a taxable deduction yet, so it's