How to claim distributorship

i purchased a coffee distributorship from the coffee company in March, 2001 for $10,000 which included display racks, coffee & the territorial rights. These items were not separated by cost, just all listed for the $10,000. I then paid a locater $3,000 to secure locations for me to put my displays on consignment. By the end of November, all of my locations had asked me to remove the displays & I effectively went out of business at that time. I have the displays and coffee in my garage & they are worthless. I was operating as a sole propiortorship. How do I list the business on my return and where can I write off the costs. Do I have to randomly assign a value to the displays & depreciate them or can I just claim the entire amount as cost of goods sold. How about the locator fees?

Set up the business on schedule C. Apportion the $10,000 between the costs of inventory, displays and territorial rights. Make the best estimates you can of the relative values. In your case the important thing is that it adds up to the $10,000. Next show any sales or any other costs you had. Then indicate that the business went out of business. Show the ending inventory as $0, which is its market value. Then show a loss on the amounts you set for the displays, territorial rights, and the $3,000 you spent to secure locations.

The end result should be a loss equal to your investment of $10,000, plus the $3,000 fee, plus any other expenses you had, less the amount of any sales.