Discussion:Tax Treatment of "Product Sample"

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Discussion Forum Index --> Basic Tax Questions --> Tax Treatment of "Product Sample"


Discussion Forum Index --> Tax Questions --> Tax Treatment of "Product Sample"

SoCalEA (talk|edits) said:

11 February 2009
I have a client that started a new business this year. During the year she paid to have a number of product samples created to in order to sell her product to customers and potential investors. Does this need to be capitalized or can it be expensed? Personally I feel that it qualifies for Research & Developmental. I've tried to find specific examples that pertain to this but I have been unsuccessful.

Any thoughts?

Moon101 (talk|edits) said:

11 February 2009
I agree that the rules of R&D expense is the same for a "product sample."

Taxea (talk|edits) said:

11 February 2009
Advertising? taxea

Bilbo (talk|edits) said:

11 February 2009
Sounds like advertising to me. Much like promotional items - pens, calendars, etc.

Bilbo

Kevinh5 (talk|edits) said:

12 February 2009
I think he means 'prototype' product - not a promotional item, but a working (or not) model of the product if produced en masse.

Taxea (talk|edits) said:

12 February 2009
If it is a prototype to be marketed in order to determine whether it is a "sellable" product, or to interest investors in further R&D of the item, I would agree with you, Kevin. But the poster did include for sale to customers and potential investors which leads me to believe that this product is ready for the retail market and the samples to the potential investors would be to obtain financing to grow the business. If this is the case then I still think this is advertising/promotional expense. taxea

SoCalEA (talk|edits) said:

12 February 2009
I apologize for not being more clear.

The samples were used for demonstration purposes to potential investors and to potential customers. What I meant by customers is that the taxpayer will take the sample to a store and show the product to see if they want to carry the item.

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