Client is a manufacturer of high-end manufactured homes. There is damaged/obsolete inventory with an historic cost of $1,000,000. The inventory was carried on the balance sheet at $1,000,000. The damaged inventory includes manufactured home sections were left exposed to the weather and should be hauled away as junk. Essentially, this inventory has been destroyed by the elements. On the GAAP financial statements, inventory was written down the past 2 years in a row. The inventory write-down is correct under GAAP. o In 2022 inventory was written down by $600,000 o In 2023 inventory was written down by $400,000 o Each year the journal entry was Debit: Loss from Damaged Inventory Credit: Inventory Tax returns o Company files Form 1120 as a Corporation o Both the 2022 $600,000 write down and the 2023 inventory write down of $400,000 were deducted on Forms 1120. o The Company is in the 21% marginal tax bracket. Additional Discussion 1. Are the inventory write-downs allowed for tax? If not, what is the correct way to handle the damaged inventory for tax purposes? 2. I believe the Company has established an accounting method by deducting the inventory losses for 2022