Donated business property

[gman]

Client is a software provider. He purchased several computers and gave them to
customers. Purchased the computers at a discount. Someone told him he
could deduct fmv. I figured cost, which is correct??

[jainen]

Neither

>>Someone told him he could deduct fmv. I figured cost, which is correct<<

Neither. Deduction for business gifts is limited to $25 per person per year.

[gman]

What if

What if the computers were required for the software?

[jainen]

you don't like the answer

You said he "gave" them to customers. If he sold them as a package, then they are inventory expensed as cost of goods sold. But you really aren't supposed to change the facts just because you don't like the answer.

[gman]

Taxpayer called and it is my understanding that he purchased them for the client.
I will clarify the facts and file it accordingly. He said he paid several thousand for the
computers, and that's a big gift for his income.

[jainen]

protection money

He won't tell you the truth. Either he is using his discount to get stuff for his friends, reimbursed under the table. Or he is paying in-kind protection money.