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The costs of materials and labor (basis) are already documented as business expense. What they did is forfeit the sale. It's the same concept as waste or damage, really. You don't get to write off the lost sales price as if that is donation.
Food donation has some new provisions.
But to be technically correct, those costs should be moved from cost of goods sold to donations. Which means if the shareholders don't itemize, they may have generated a nondeductible expense for themselves.
"they may have generated a nondeductible expense for themselves."
Which is why I tell my clients to manage things as Promotional giveaways, and not charity.
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