Texas Property Tax Consultant Practice Exam

According to the Texas Property Tax Code, how is the value of inventory generally determined?

1. By the original purchase price

2. By the expected selling price as a unit to a purchaser continuing the business

3. By the cost of manufacture

4. By similar properties in the local area

The correct answer is: By the expected selling price as a unit to a purchaser continuing the business

The value of inventory under the Texas Property Tax Code is primarily determined by the expected selling price as a unit to a purchaser continuing the business. This approach focuses on how much the inventory could realistically sell for in the current market, reflecting the value to a potential buyer who would keep the business operating. It ensures that the valuation is relevant to the market conditions and the specific circumstances of the business in question. In this context, using the expected selling price is critical because it aligns the valuation with the purpose of inventory assessment in a business context, where the inventory is not simply an asset but a means to generate revenue. It takes into account factors like demand and market trends, which influence what a buyer might be willing to pay for that inventory, rather than merely relying on historical cost or similar property sales which may not accurately reflect the current market value of the specific items in inventory.