I have always assumed that inventory was kept at cost. And when
you sell metal at a higher market you have to consider that profit.
I suppose you could buy new metal at market and sell it right away
to avoid having to take all the markup as profit. I would sure like
to hear a tax authority's opinion on this.
Although I seldom admit it, and haven’t practiced in many years, I
am a CPA. Both inventory and Cost of Goods Sold (COGS) are both based
on ‘cost…’ But there are several methods of computing ‘cost’ that
are acceptable for the IRS – FIFO, LIFO, Specific Identification,
and so on. Your description of selling the newest inventory soonest
and keeping the oldest is called LIFO (last in, first out). To use
this for tax purposes, the IRS requires you to file Form 970.
Specific Identification is typically used for something significant
and discrete, like autos or perhaps, precious gems… FIFO (first in,
first out) costing is used most frequently by businesses… One
important point is that once a business has used a method of
costingits inventory, it must apply to the IRS to change to another
method. In other words, the method you used last year is the one
that you ‘chose.’ Lastly, if you’re in business and not skilled as a
bookkeeper, hiring anaccountant to prepare your taxes is usually a
good investment. Disclaimer, don’t rely on this pseudo