Also known as: stock-in-trade · stock in-trade · inventory · merchandise
Written by attorneys · grounded in primary & secondary sources — see below
Property held by a business primarily for sale to customers in the ordinary course of its trade or business. This category of assets is excluded from capital-asset treatment under the Internal Revenue Code and yields ordinary income or loss upon disposition.
Summit Bank repossesses a delivery van from a defaulting borrower and impounds it under standardized police procedures. Officers conduct an inventory search of the van's interior and discover boxes of electronics that constitute the borrower's stock in trade. The electronics are documented as part of the lawful inventory and later returned to the secured creditor.
After Samuel Soto's death, his personal representative prepares the required inventory of estate property within three months. The filing lists the unsold merchandise at Soto's retail store as stock in trade, with fair market values and any liens noted for each item.
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Sterling Manufacturing buys new machinery on credit from a supplier that perfects a purchase-money security interest within twenty days of delivery. The machinery is not part of Sterling's stock in trade, so the supplier's interest takes priority over an earlier blanket lien on all assets.
Police seize a sports car from a public valet stand after tracing investor funds to its purchase. A later inventory search uncovers records showing the vehicle was used to transport the owner's stock in trade of counterfeit goods, which are admissible because the initial seizure was lawful.
Sapphire Technologies finances its incoming shipments of computer components with a new lender that perfects a purchase-money security interest at the moment of delivery. The lender sends timely notice to the existing inventory lender, giving the new interest priority over conflicting claims in the stock in trade.
After arresting Spencer Silver on an outstanding warrant, officers inventory the contents of his briefcase at the stationhouse. The briefcase holds sample products that Silver uses as stock in trade for his side business, and the items are logged pursuant to routine booking procedures.
Stock in trade is excluded from the definition of a capital asset under IRC § 1221(a)(1). Its sale therefore produces ordinary income or loss rather than capital gain or loss.
Supporting sources
Yes. One recognized meaning of stock in trade covers the tools and equipment owned and used by a person engaged in a trade, as well as the equipment needed to run a business.
Supporting sources
When a defendant operates a business that buys and resells goods, evidence that the goods were treated as stock in trade can help prove the defendant was engaged in the business of receiving stolen property, elevating the offense grade.