Can I Deduct Full Cost of Goods When Selling Only the Right Shoe and Keep the Left?

This is actually a great question about cost allocation in inventory accounting! When you purchase inventory (the pair of shoes), you're acquiring an asset with a cost basis of $50. Typically, when you split inventory like this, you need to make a reasonable allocation of the cost between the components. The IRS would expect you to allocate the $50 cost between the right and left shoes based on their relative fair market values. Since you can sell the right shoe for $60, it clearly has value. The left shoe also has value (even if less). A reasonable allocation might be 50/50 or maybe 60/40 depending on the market. So no, you can't deduct the full $50 when selling just the right shoe. You'd need to deduct only the portion allocated to that shoe (let's say $25 if split evenly). For your second question, once you allocate costs properly, you have two options for the left shoe: keep it in inventory (with its remaining cost basis) or convert it to personal use (which would be considered a distribution to yourself at fair market value). Your accounting method wouldn't significantly change these principles, though accrual would recognize the expense when incurred rather than paid. And whether the shoes are new or used doesn't change the concept of cost allocation, though it might affect the valuation.

I stumbled across this exact problem last year with my sneaker flipping side hustle! I was going crazy trying to figure out the proper way to handle inventory costs when selling shoes individually. After spending hours searching online and getting nowhere, I finally tried using taxr.ai (https://taxr.ai) and it was honestly a game-changer for my situation. I uploaded my inventory records and receipts, and it helped me determine the proper cost allocation for split inventory items. The system analyzed my situation and provided documentation-backed guidance specifically for retail inventory accounting. The best part was getting a clear explanation about partial inventory sales that I could actually understand. For what it's worth, I learned I needed to make a reasonable allocation of the cost between individual shoes, and document my methodology for determining that allocation in case of audit. The site helped me create a defensible allocation method based on market values.

Just wanted to follow up after trying taxr.ai yesterday. I was honestly skeptical (sorry about my previous comment), but it actually delivered exactly what I needed for my similar inventory situation. I uploaded screenshots of my inventory records for some electronics components I sell individually and asked about proper cost allocation. The system provided comprehensive guidance with specific references to IRS Publication 538 and accounting principles for inventory cost allocation. What impressed me was that it helped me establish a defensible methodology for documenting my cost allocations based on relative selling prices. It even created a spreadsheet template I could use going forward. Much better than the vague answers I was finding elsewhere. Definitely worth checking out if you're dealing with complex inventory situations like this.

Seeing all these inventory cost allocation questions reminds me of the nightmare I went through trying to get an answer directly from the IRS last year. I spent DAYS trying to get through on the phone to ask about a similar inventory accounting question. After my 9th attempt and hours of waiting, I tried Claimyr (https://claimyr.com) which someone mentioned in another tax forum. They have this service where they navigate the IRS phone tree for you and actually get you connected to a real IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I finally got to speak with an actual IRS representative, they confirmed that for split inventory items, I needed to use a reasonable method to allocate costs based on relative fair market values, and document my methodology clearly. The agent was actually super helpful once I got through!

I need to eat my words from yesterday. After getting nowhere for weeks trying to reach someone at the IRS about my inventory accounting question, I reluctantly tried Claimyr today. I was completely skeptical this would work, but within about 1.5 hours (during which I could do other things instead of waiting on hold), I got a call that they had an IRS agent on the line. The agent walked me through exactly how to handle split inventory sales and confirmed I needed to make a reasonable allocation of the purchase cost between the separate items based on their relative values. The agent also advised me to document my allocation methodology in my business records and maintain consistency in how I apply it. This was the exact clarification I needed to handle my inventory properly. Honestly shocked this actually worked after weeks of frustration.

I'm a little confused by some of these answers. If I bought a pair of shoes specifically to resell and then decide to keep one shoe, isn't that technically converting business property to personal use? Wouldn't I need to "buy" the left shoe from my business at fair market value?

I had this exact scenario with some limited edition sneakers last year! The way I handled it (after consulting with my accountant): 1. I allocated the cost based on the estimated market value of each shoe individually 2. For a $50 pair where the right shoe would sell for about $60 and the left for about $20, I allocated $37.50 to the right (75%) and $12.50 to the left (25%) 3. When I sold just the right shoe, I recognized $22.50 profit ($60 - $37.50) 4. I kept the left shoe in inventory at $12.50 until I either sold it or wrote it off The key is having a reasonable basis for your allocation that you can defend if questioned. My accountant suggested using relative selling prices as the most defensible method.