What is the value of donation items for tax purposes?

Question

Hi,

We have a clothing store and we want to donate some clothes to charity. They are all brand new. Do we value them at our cost (wholesale price) or at the market / retail price for tax purposes (partnership)? Thanks.

Answer 1

There are special rules for donating inventory (hot assets) from a business. What you are allowed to do is take the full cost and 50% of the markup. For example if the item cost 5 and you sell it for 10 you would value it at $7.50. [5+(10-5/2)].