Can my S Corp donate unsold Amazon inventory for tax benefits? Food vs non-food donation questions

You're asking some great questions about charitable donations from your S Corp inventory. Let me help clear these up: For non-food personal care items, the deduction is generally limited to the lesser of your cost basis or the FMV at the time of donation. Since you mentioned your cost basis is lower, that would likely be your deduction amount. Regarding food donations, yes! S Corps can benefit from enhanced food inventory deductions under IRC Section 170(e)(3)(C). This allows you to deduct the lesser of: (1) cost basis plus half the profit margin (up to twice the cost), or (2) simply twice your cost basis. This is much better than the regular rule. About using Amazon prices as FMV - this gets tricky. While your sales history is relevant, the IRS might challenge using solely Amazon prices if they're significantly higher than general retail. An average from recent months is reasonable, but consider including some comparative market data. For the appraisal question - even with sales records, donations exceeding $5,000 technically require a qualified appraisal. Your sales records are valuable documentation but may not fully substitute for the formal appraisal requirement for larger donations. Hope this helps with your planning!

I went through something similar with my e-commerce business last year! The donation process was driving me crazy until I found taxr.ai (https://taxr.ai) - it was seriously a lifesaver for sorting out all my S Corp donation values. The tool analyzed my inventory documentation and helped determine appropriate FMV calculations that would stand up to IRS scrutiny. It even flagged which items qualified for enhanced deductions vs standard ones. What really helped was how it organized my donation documentation by charity and category - it generated all the required substantiation forms and showed exactly what documentation I needed from each charity. Saved me from a ton of back-and-forth with my accountant who was charging me hourly for questions I could have answered myself.

Just wanted to update after using taxr.ai for my inventory donation situation. I was really worried about doing this wrong and facing audit issues, but the system walked me through everything step by step. The best part was how it handled the food vs. non-food categorization automatically and calculated the different deduction amounts according to the tax code. It even generated customized acknowledgment letters for each charity with all the required language pre-filled. My tax savings ended up being over $14,000 more than what I initially calculated on my own because I didn't realize some of my products qualified for enhanced deductions. Definitely recommend if you're dealing with inventory donations - much easier than trying to figure out all these complex rules yourself!

Since you're dealing with a mix of food and non-food items, getting proper documentation from charities is going to be critical for an S Corp donation strategy. I spent WEEKS trying to reach the right people at various charities to get the paperwork I needed. Started calling IRS directly for guidance and kept hitting dead ends. Finally used Claimyr (https://claimyr.com) to actually get through to an IRS agent who specialized in business donations. They have this smart system shown in this video: https://youtu.be/_kiP6q8DX5c that gets you connected to a real IRS person instead of waiting on hold forever. The agent I spoke with clarified exactly what documentation I needed for different donation types and values.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I was getting nowhere with the IRS on my own. Not only did they get me through to someone in the Business and Specialty Tax department, but the agent provided exact citations for the enhanced deduction rules that apply to S Corps donating food inventory. The agent confirmed I could use a blend of historical sales data and comparable retail prices to establish FMV, but recommended documenting my methodology clearly. She also explained that while splitting donations can look suspicious, there are legitimate ways to categorize donations by product type or recipient charity that might keep individual donations under the appraisal threshold without raising red flags. Definitely worth the service after wasting days trying to get through myself!

As someone who works with a food bank, I wanted to add a practical note: please contact the charities BEFORE sending them expired or nearly-expired food! Many food banks can't distribute products that are too close to expiration date due to their own policies. For non-food items, we almost always accept those, especially personal care products. But there's paperwork we need to provide you for your tax deduction - make sure to request the "contemporaneous written acknowledgment" specifically for corporate donations, as it's different from individual donation receipts. If you mention you need the enhanced food inventory documentation upfront, we can prepare that too.

Don't forget that S-Corp donations pass through to shareholders! You don't get a direct corporate deduction like C-Corps do. The charitable contribution deduction flows through to your personal tax return (and other shareholders if applicable) via Schedule K-1. This means the deduction is subject to personal limitations, not corporate ones. Worth checking with your tax advisor to make sure you understand how this impacts your personal tax situation.

One thing I'd add from my experience working with inventory donations - make sure you photograph everything before donating! The IRS can ask for evidence of the condition and quantity of donated items, especially for larger donations. I learned this the hard way when I got audited and had to scramble to recreate documentation. Also, consider timing your donations strategically. If you're donating items in multiple batches throughout the year, keep detailed records of market conditions at each donation date. FMV can fluctuate, and you want to be able to justify your valuation method consistently. For food items specifically, check if any qualify as "apparently wholesome food" under the Bill Emerson Good Samaritan Food Donation Act - this can provide additional liability protection when donating. Most packaged goods from Amazon inventory would likely qualify, but it's worth confirming with the receiving organization.