Pam and Joe each own 50% of Tucson LLC a limited liability company located in Tucson, AZ which was created in April of 2019.Tucson LLC provides veterinary services and uses the cash method of accounting.Pam and Joe have come to you on December 30, 2019 to ask your advice on some transactions they are considering.

Tucson's financial information is provided below:

Profit and Loss Statement January 1, 2019-December 30, 2019:

Gross Receipts:

Veterinary Services $675,000

Expenses:

Salaries $400,000

Utilities $17,000

Depreciation $15,000

Supplies $75,000

Interest $20,000

Total Expenses $557,000

Net Income $148,000

Balance Sheet - 12/30/2019

Assets:

Cash $ 8,500

Equipment $50,000

A/D - Equipment (21,500)

Building $250,000

A/D - Building (100,000)

Total Assets $187,000

Liabilities & Equity:

Mortgage - Building $25,000

Member Capital - Avery $81,000

Member Capital - Henry $81,000

Total Liabilities & Equity $187,000

Please provide Tucson LLC advice on the following:

Tucson LLC isconsidering whether or not they should expand their business to sell flea & tick medications, dog and cat food, pet toys and collars beginning on 1/1/2020.Discuss the tax issues that may result from Tucson LLC maintaining inventory in addition to providing veterinary services.