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Tax write off of spent grains


John D

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I am still working with my accountant with setting up Corp or LLC. I know he will give me or ask what the standard for distillery is or give me a yes you can BUT!

Is their anyone writing off the spent grain. You paid for it, used a portion of it and had the discard the rest. It should still have some type of P&L. I meet with him of Friday and trying to predict what he will ask. I try to write off ANYTHING It really gets on his nerves sometimes but that's what I pay him for.

Thanks

John

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You would first have to find someone who would give you a value for it. Everyone I've heard of in both brewing and distilling is simply glad for a farmer to pick it up for livestock feed. It saves them from paying for disposal, and satisfies DNR requirements for disposal

If you tried to sell it that would become income, more taxes paid.

It's worth more of a write-off as 'cost of disposal' unless you can find a legitimate income generating use. Personally, I wouldn't rock the boat on that one. Ranks up there with trying to take a percentage of you trash bill for a home business, just another flag on the forms for an audit when starting out.

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If you spent money on it, it's an expense. You can't 'write off' more than you paid for it and the IRS could care less if you throw it to a farmer, trash can, or whatever. Cost is cost. And yes, if you sell it, it's income. However, a dollar taxed is still more money than no dollar at all.

So for the accountant: Whatever you spend on materials is 'Cost of Goods' and leave it at that. Your accountant could care less how you disposed of it.

Tax accountants come in a range of conservative to very aggressive. They are also not there to help you run your business more efficiently, just to minimize (hopefully) your tax burden within the law. If you feel your accountant is too limiting on deductions or can't explain adequately what is and is not permitted you really should seek second opinions.

(I may be simplifying here but I'm also an accountant so trying not to be too techincal. Happy to elaborate if anyone wants more details)

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  • 3 weeks later...

I do what Pacioli recommends. It is a cost of goods, and whatever you decide do with the byproduct is simply absorbed by that cost. Sounds like your accountant is being overly picky for no reason. Might think he/she is doing you a favor, but simple is always better.

A handshake deal for a couple of hogs in exchange for the grains works for us. We're happy because the grain is gone, and the farmer is happy because his hogs fetch a higher price at market. win win. Don't write it down - it makes it a legally binding document, and we have enough of that pain in the ass to deal with as it is. Keep is simple. Accountants and lawyers are a necessary evil, but a pain in the ass none the less (sorry pacioli).

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