non-cash donations

[ace]

what is the proper way to account for non-cash merchandise donated to a non-profit group or event? For instance, we donate a necklace ($40 retail value, $15 actual cost) to a cancer organization who is a non-profit. We are taxed as an S corp.

Thanks

[SeattleCPA]

I think you'll need to deduct your cost and not the "retail" value... also, you'll need to report the cost not as a business deduction but rather as a charitable contribution so the contribution correctly flows through to the shareholder via the k-1.

BTW, I always tell clients in your situation that you may just want to throw the inventory away and get a full, easy, good business deduction for scrapping inventory rather than an itemized charitable contribution.