Hi,

For tax purposes I need to know how I can determine the fair market
value of a resistor,
capacitor, inductor, or active component in working condition that is
salvaged from
scrapped equipment.

One way, I suppose, would be to ask how much a disinterested party like
yourself(s)
would be willing to pay. Another, I suppose, would be to treat each
part as a piece of
clothing and assign it 1/2 to 1/4 retail value as a used article.

Opinions?

Thanks,

The Eternal Squire

For tax purposes I need to know how I can
determine the fair market value of a resistor,
capacitor, inductor, or active component in
working condition that is salvaged from
scrapped equipment.

Value of scrapped equipment: $1.

Labor to strip components: $200.

Value of stripped components: Negative $199.

Is this for "income" determination or for "inventory tax" purposes?
Inventory tax has to be the most anti-scrapyard thing ever imagined.

Tim.

This is to determine initial corporate inventory. The fair market
value of an item is defined as the price a disinterested party is
willing to pay for it in an arm's length transaction. So that value
of stripped components actually isn't negative, this is why salvage
works: it creates value by selling saleable parts from a valueless
scrapped object.

The Eternal Squire wrote:

The fair market
value of an item is defined as the price a disinterested party is
willing to pay for it in an arm's length transaction.

I don't get it. Seems like a disinterested party and a buyer are two
different things?

But I'm clearly not a lawyer either.

-Bill

From what I understand a buyer can be anyone, but a disinterested party
is a buyer who does not have a personal relationship with the seller.

On 20 Jan 2006 19:11:24 -0800, "The Eternal Squire"
wrote:

This is to determine initial corporate inventory. The fair market
value of an item is defined as the price a disinterested party is
willing to pay for it in an arm's length transaction.

a disinterested party has no interest in the item and therefore the
item has no value.
Don't we love English in a legal document, it can be made to say
anything, everything and nothing in the same sentance.

The Eternal Squire wrote:
This is to determine initial corporate inventory.

My advice here is to choose the method that gives you an answer of
zero. Otherwise you have to deal with inventory taxes (depending on
locality).

The fair market
value of an item is defined as the price a disinterested party is
willing to pay for it in an arm's length transaction. So that value
of stripped components actually isn't negative, this is why salvage
works: it creates value by selling saleable parts from a valueless
scrapped object.

If necessary, do not create taxable value until you can sell it.
"Creating value" that you have to pay inventory taxes on is foolish.

The folks that actually do this stuff for a living (usually meager, but
they seem to enjoy it) quickly learn that if you aren't turning over
your inventory several times a year, that you aren't making any money.

Realistically the IRS may very well classify your attempted business
activities as a hobby if all your components sit in boxes for years
without getting sold. And classifying it yourself as a hobby may be a
good thing too, at least psychologically.

Some localities also tax personal (non-business-inventory) property and
I also advise you to not inflate this number either!

Important note: I am not in any way a business or tax advisor. But I do
know (through the school of hard knocks) what I have to do to keep my
hobbies/obsessions from becoming some stupid time-and-money-sink
business model :-). That doesn't mean I don't do them, it just means
that I keep them in a separate compartment in my head full of holes.

Tim.

Tim Shoppa wrote:
The Eternal Squire wrote:
This is to determine initial corporate inventory.

My advice here is to choose the method that gives you an answer of
zero. Otherwise you have to deal with inventory taxes (depending on
locality).

The fair market
value of an item is defined as the price a disinterested party is
willing to pay for it in an arm's length transaction. So that value
of stripped components actually isn't negative, this is why salvage
works: it creates value by selling saleable parts from a valueless
scrapped object.

If necessary, do not create taxable value until you can sell it.
"Creating value" that you have to pay inventory taxes on is foolish.

Yes, I had better look. I thought though that inventory taxes take
effect on an increase in inventory... because otherwise you would
have to pay taxes on the same inventory year after year. Do people
really do that?


The folks that actually do this stuff for a living (usually meager, but
they seem to enjoy it) quickly learn that if you aren't turning over
your inventory several times a year, that you aren't making any money.


Okay.

Realistically the IRS may very well classify your attempted business
activities as a hobby if all your components sit in boxes for years
without getting sold.

Actually, I want to sell my used stuff and replace with new. I'm also
sitting on top of a pile of (s)crap that I hope I can use to raise
funds.

And classifying it yourself as a hobby may be a good thing too, at least
psychologically.

I just got laid off by an engineering company some months ago. I've
switched
roles with my wife, so that now I am a full time homemaker and parent
for my
two year old. That part is wonderful, but I want to make sure my prior
skills
and drive will not go to a total waste. I have found the possibilities
for
employment as a software engineering to be rather dismal to do the
latest
mania regarding offshoring.

I'd rather go into business for myself and develop some type of
intellectual property, whether it be software, hardware, or
entertainment. To this end I filed papers to start
an LLC. I am going to elect taxation as a C corporation, because I
want its finances
totally seperate from mine, reinforcing the liability shield. If a C
corporation does not
earn very much in a short period of time but stays out of debt in the
long term, this is not a hobby, just a very slowly growing business.

Some localities also tax personal (non-business-inventory) property and
I also advise you to not inflate this number either!

Inflate nothing! I just want to know what the right thing is so that I
can do
it.

Important note: I am not in any way a business or tax advisor. But I do
know (through the school of hard knocks) what I have to do to keep my
hobbies/obsessions from becoming some stupid time-and-money-sink
business model :-). That doesn't mean I don't do them, it just means
that I keep them in a separate compartment in my head full of holes.

Tim.

And I've got nothing better to do right now than to take what was my
hobby and
try to make something out of it.. I have a fair amount of weekly time
and the
rest of my life to decide what to do with it. I have plenty of
(s)crap. I have
a little bit of money. But what I am suffering most from is a lack of
a decent idea.

The Eternal Squire

Personally (for ham radio purposes) I wouldn't normally buy individual
used small components that have a current retail value of under about
$3. I would rather get new ones which have a greater probability of
working (regardless, in my opinion, of the seller's claims regarding
testing) and, in some cases, longer leads. By this thinking around 95%
of parts found in typical equipment are of no value, which simplifies
your calculations.

For more expensive components, something like 10-20% of the new price
is about the average of what I would pay.

Normally unavailable replacement parts and "antique" parts are another
story, of course.

73,
Steve VE3SMA

Put a dozen or so of each on eBay and you'll get the best answer as to
value.

--

73
Hank WD5JFR
"The Eternal Squire" wrote in message
oups.com...
Hi,

For tax purposes I need to know how I can determine the fair market
value of a resistor,
capacitor, inductor, or active component in working condition that is
salvaged from
scrapped equipment.

One way, I suppose, would be to ask how much a disinterested party like
yourself(s)
would be willing to pay. Another, I suppose, would be to treat each
part as a piece of
clothing and assign it 1/2 to 1/4 retail value as a used article.

Opinions?

Thanks,

The Eternal Squire