Hello all,
I have an antique resale business in California and we have a massive collection of antiques at home... A barn full of broken up furniture that my wife refinishes and paints them, then we put it in the shop for sale. Most of these purchases took place years ago and are un-receipted.
Now I am thinking about taxes... Both for business and personal (we are a partnership/sole proprietor).
My wife has been entering the new furniture from Quickbooks under Vendor="HOME" and at a 0 dollar, so COGS is 0... This means that every time one of them sells, that the whole thing is going to Net Income... Which means that at the end of the year I will pay a considerable about of income tax in the business.
My thoughts:
I would like to charge the business against owner's equity and consider that we are "selling" the refinished piece to the business at 1/3 of the resale price. Then also entering the refinishing supplies as expense (paint, sandpaper, etc...) as another transaction (as they are non-inventoried supplies, less than $500).
Why 1/3?
It is sort of a random number on my head... More like a conservative estimate... My wife says that a rule of thumb for her buying is that if she can sell it for twice as much as she paid, then it is good. So far this theory covered all of our costs and overhead. I am thinking that if I enter the 1/3, then I am not being deceitful to our own practices and also paying Uncle Sam his fair share... But in all honesty I feel very insecure about this inventory asset valuation...
Does anyone have any thoughts about this?
I have an antique resale business in California and we have a massive collection of antiques at home... A barn full of broken up furniture that my wife refinishes and paints them, then we put it in the shop for sale. Most of these purchases took place years ago and are un-receipted.
Now I am thinking about taxes... Both for business and personal (we are a partnership/sole proprietor).
My wife has been entering the new furniture from Quickbooks under Vendor="HOME" and at a 0 dollar, so COGS is 0... This means that every time one of them sells, that the whole thing is going to Net Income... Which means that at the end of the year I will pay a considerable about of income tax in the business.
My thoughts:
I would like to charge the business against owner's equity and consider that we are "selling" the refinished piece to the business at 1/3 of the resale price. Then also entering the refinishing supplies as expense (paint, sandpaper, etc...) as another transaction (as they are non-inventoried supplies, less than $500).
Why 1/3?
It is sort of a random number on my head... More like a conservative estimate... My wife says that a rule of thumb for her buying is that if she can sell it for twice as much as she paid, then it is good. So far this theory covered all of our costs and overhead. I am thinking that if I enter the 1/3, then I am not being deceitful to our own practices and also paying Uncle Sam his fair share... But in all honesty I feel very insecure about this inventory asset valuation...
Does anyone have any thoughts about this?
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