Correct way to write off inventory first yr after purchase?

[Mats Daniel Skrede]

Good day, all! 

Last year I purchased my first investment property. In my bid that was accepted, I included in the conditions that I buy the property as is and that everything will be included with the purchase; including appliances, beds, sofa, tv, jacuzzi, outdoor patio, etc. The bid were accepted and we did not set any additional cost for this in the contract. 

Now when doing the tax return for the first year after purchase, how would one go about properly setting a value on all the inventory when writing this off?

[Bill B.]

1) If you think you can get more than $1,000 for a used jacuzzi, sell it now, I’ve had some luck at giving them away otherwise it costs money. 

 2) Don’t forget, you aren’t creating new writeoffs. Anything you write off now is coming off the basis of the property and creating a) lower annual deductions b) a higher tax bill in the future. 

3) if the property doesn’t turn a profit this year (in the next month), you’re just carrying those expenses forward anyway, just like you would with the depreciation. 

4) if you truly don’t have a qualified CPA and you’re talking about such small amounts it doesn’t pay to hire one maybe you just guess? Just like you’re going to guess on what portion of the property is land and what portion is depreciable. Maybe you can replace your current cpa with a more qualified one? Especially if you plan to have more than 1 in the future. And hopefully before they all get busy doing tax returns. Good luck and congrats on getting started. 

Ps. A year or two from now you’ll realize this was the smallest real estate “problem” you ever faced.