How to Value YourItems
Take pictures of all the items you entered in the Inventory-
Keeper. This will help support your estimate of its fair market
value. For each item, do your best to determine a reasonable
estimate of its fair market value at the time it was first used in
your business. Use the lesser of how much a friend or neigh-
bor would pay you for it or the actual cost to you. Do not use
a replacement cost or the original purchase price if the item is
more than a year old. There is no IRS-approved method to
calculate this. As long as you make a reasonable determina-
tion of an item’s value, you should not be challenged by the
IRS. Here are some tips you can use to determine the fair
market value of items:
• If you have the original receipt (or canceled check or credit
card statement) or know the original cost for an item, you
may want to reduce the original cost by 1⁄7for each year
that you have owned it (reduce by 1⁄5for each year for a
computer or printer). For example, if you bought a sofa for
$1,000 in 1995 and started using it for your business at the
start of 1998, you might estimate its fair market value at
$570 ($1,000 - [$1,000 / 7 x 3] = $570). Look at the condi-
tion of your property to see if this is a reasonable estimate.
Remember, you must use the lesser of the fair market value
of the item, at the time you use it for your business, or its
original cost. If you’ve owned an item for more than seven
years, use perhaps 5 to 10% of the original price.
• Take pictures of your items to a local used furniture store
and ask a salesperson what your items would have been
worth when you started using them in your business.
• Estimate what an item would be worth if you tried to sell
it at a garage sale.