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Charitable Donation - Favorable Treatment vs. Regular P&L Expense?

If a company has some inventory that it wrote off for minor defects that rendered them unsalable is there any point to appraising the goods for treatment as a charitable donation? Basically wondering if the tax treatment as a donation is favorable vs. standard expense. Also, it's clear that *both* can't be reported in the financials but is it possible to report as a write-off in the P&L but take the portion donated and report as donation on the tax return (net / net same expense but maybe different treatment). Not a tax guru, so appreciate the time in advance.

Answers

Edward Thill
Title: VP - Finance & Operations
Company: Performance Trust
(VP - Finance & Operations, Performance Trust) |

I don't claim to be a tax guru either but I believe, in some scenarios, a charitable donation could actually be less advantageous from a tax perspective depending on your org type. Whereas you can fully deduct the expense of disposed worthless inventory, if you are a pass-thru entity (i.e. sole proprietorship, S-Corp, LLC) that assigns value to donated product, the deduction for that charitable gift passes to the owners and could be subject to limits and phase-outs. You're better off documenting that the product has no value, write it off completely, and then make the contribution to the charitable organization as your form of "disposal".

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