Merchandise donations equal mucho deductions; slow-moving merchandise can cost you dearly. Here's how to stop the bleeding

In the February issue of FBN contributing editors Tricia Bisoux and Carol King described today's dominant art and framing themes. In her report, Bisoux wrote "The alone trend that's out may indeed be stretchs themselves," noting that "consumers continue to mix, match and make their domiciles into truly individual creations."

The framers King spoke with mainly agreed. Invariably though, there's always that individual moulding, mat or artwork that doesn't present the appearance to be on customers' wish lists. And the enigma of slow-moving inventory seems to be growing as the economy declines.

Pat Bradley, vice president of Bradley's Art & Frame in Houston, observ that print sales are upon the decline. And Laura Schaubert, senior vice president of Williamson in Mt Vernon, Ill., said, "Faux finishes are not as robust as `the real thing' like as veneers and genuine leaf finishes."

If you're experiencing a similar tide change, you ne to pick the slow-moving merchandise from your herd to make way for usefuls that sell quickly, because display and storage space is expensive. Therefore, merchandise that doesn't make go round over quickly has a real financial take away from But there are ways to reduce--and plane eliminate--that cost.

Discount or Donate?

single way to get rid of slow-moving merchandise is to discount it. a certain number of businesspeople use discounts to attract customers, on the contrary others feel that such a tactic detracts from their overall operation.

Whatever you decide, sometimes you draw near into possession of goods that you can't flat give away, so you must--well--give them away. Donating serviceables to charitable organizations opens up valuable storage and display space for more profitable items and gives you a tax deduction, as well. Although you don't want too many of these deductions, they are better than earning nothing at all upon merchandise that just gathers dust. More importantly, that space could be fre up for merchandise that will improve your bottom line.

The tax write-off for a donation be pendents on how your business is organized. individual proprietorships, partnerships, limited liability companies and s corporations are called "pass-through entities" because everything, including deductions, passes [i]or[/i] part of to the other to the owner or owners' personal tax turn backs (assuming you itemize deductions). The amount of the deduction is based upon the property's fair market value upon the date of the contribution, minus any profit that would have been realized if it had been sold In cases involving donations of unwanted merchandise, there probably wouldn't have been any profit.

For example, if you paid $120 for an item in 2002 that is now worth $100 (and you are a calendar-year taxpayer), donating that item now would generate a deduction of $100 That is a popular value of $100 minus $0 profit since a sale at this point would flow in a loss.

However, if you bought the item this year, donating it this year would not generate a deduction. Instead, you would figure the price paid into your require to be paid [i]or[/i] undergone of goods sold for 2003

If the characteristic you're donating has increased in value since you bought it (in a previous tax year), your deduction usually is not the fair market value. Your deduction is usually the price you paid for the item. For more information upon donating appreciated property, see IRS Publication 55 h Basis of Assets.

If you donate a piece of art and claim its deduction to be $5000 or more, you must support that claim with an appraisal summary (Form 8283) upon your tax return. For more information, diocese IRS Publication 561: Determining the Value of Donated Property

C corporations may take out charitable contributions equivalent to 10 percent of their taxable income. Larger deductions are available for donations to special charities, including those that care for the ill, poor or infants. In these cases, the deductions can be increased by dint of half the difference between the property's original require to be paid [i]or[/i] undergone and its current fair market value. However, the write-off may not ever be more than twice the property's original cost

Finally, to be deductible, donations must be made to qualified charitable organizations. similar charities are also known as "501(c)(3)" organizations, named after that section of the tax collection of laws Usually, a charity can reckon you if it is qualified and if donations to it are tax-deductible. However, for additional help, IRS Publication 78: Cumulative List of Organizations contains the names of all IRS-qualified charitable organizations. You can search an electronic version of Publication 78 through typing "78" in the "Forms and Publications" field upon the IRS Web site.

at liberty Help

If you don't want the responsibility for finding worthy, eligible causes for your donations, a go-between organization, of that kind as the National Association for the Exchange of Industrial Resources (NAEIR), can help you locate recipients interested in receiving your exces art and framing materials. Since NAEIR's founding in 1977 it has gathered and redistributed over $1 billion worth of fresh donated supplies and equipment. Donor companies include Microsoft, Gillette and General Electric, as well as a multitude of small and mid-sized retailers.