Do you report cost of goods sold if you received inventory as a gift?

Question

someone gifted me some inventory at no cost to me. Now I am selling the products but I want to know if on my income taxes I should report the cost of goods sold as $0 (what it cost me) or what it normally costs.

Answer 1

You would report the cost to you ($0) rather than the usual retail value. Different people and companies pay all levels of pricing for the same items depending on the deal they've worked out, the quantity they're buying, or where they are in the product chain, so everyone just reports what it cost them personally. It's the same principle as if you got the item at a very deep discount -- you would report the $1 you paid rather than the $100 it's worth, for example.

Congratulations on the small windfall.