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Discussion Forum Index --> Tax Questions --> Is This Transfer a Gift?
Joans (talk|edits) said:
| 4 March 2006
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| A company bought an inventory of wire at $1000 to be used in a project but the project was cancelled. Rather than throw good wire away they asked around and found another business (unrelated, not a vendor) that would take the wire at no cost. Is this wire a gift to the other company? If so would the basis of $1000 transfer and if the receiving company sold the wire for equal or less than $1000 the income would not be taxable? I ask this because it appears it is a gift and from what I have read the basis transfers in a gift. The basis is in the hands of the giver and in this case the giver's basis was $1000. They could not deduct the cost until it was out of their hands. Is this right?
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SJ (talk|edits) said:
| 5 March 2006
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| If the transfer is not in anyway compensation it should be a gift. The basis transfers in a gift.
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Lois (talk|edits) said:
| 5 March 2006
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| Why not just adjust inventory balance at year end to actual - which would not reflect the $1,000 of wire because it would be scrapped by this company. That is how you get the $1,000 deduction. The fact that they gave it to someone is irrelevant - they could have thrown it out and still have received the $1,000 deduction by the decrease in inventory.
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