Hi,

Client buys and sells items on ebay. Should COGS be calculated per an inventory method (average price, specific cost etc), or can he claim all he purchased even though not sold? He says his friend and his accountant just claim all purchases.

Per schedule C instructions, I believe COGS should account for year end inventory, even though he's a cash small business taxpayer. Thanks!

Exception for small business taxpayers. If you are a small business taxpayer, you can choose not to keep an inventory, but you must still use a method of
accounting for inventory that clearly reflects income. If you choose not to keep
an inventory, you won't be treated as
failing to clearly reflect income if your
method of accounting for inventory
treats inventory as non-incidental material or supplies, or conforms to your financial accounting treatment of inventories