Doc wrote:

- quote -

Yes.

- quote -

Inventory would be those things that actually end up in
customers' hands. The four things you mentioned above
(mailers, labels, cases, and unburnt CDs) would count.

Follow the Schedule C (back side):
- You know what you started with (in this case, zero),
- You know what you bought,
- You know what you still have on hand at the end of
the year,
so
- The computation that results from the form should
equal what ended up in customers' hands (paid or free).

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- quote -

Inventory is only what goes into the direct sale of an item
(the CD, the labels, the unburned CD-Rs)

May I suggest that, because you've posted several times with
similar questions about inventory, that you consider a
consultation with a local knowledgeable tax pro. Inventory
and depreciation are generally the most complex areas in a
new small business' tax return. In both cases, if they are
not set up correctly the first year, they will potentially
mess up figures in future years.

--
Jan Zobel EA, author of 'Minding Her Own Business:
The Self-Employed Woman's Guide To Taxes and Recordkeeping'

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The kind of product I'm selling are novelty CD's that I
produce and have only had a small number of sales. I burn
the CD's as the orders come in and mail them out.

Line 35 says Inventory at begining of year. If I started the
business in Oct. would the inventory at the beginning of the
year be $0.00?

What about the ending inventory on line 41? What exactly is
considered "inventory"? Is it everything you've bought for
the business including every last paper clip and file folder
or just the items you're actually selling? I have mailers,
mailing labels, CD cases, unburned CD-R's. I've sent a few
out or given a few away that weren't sold, as promos. How do
you figure all this in especially in the small numbers that
are involved here? Say, fewer than 20.

I sincerely appreciate all input.

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