The gist of the regs as I understood them is that you can't goose up your financial statements with inventory that you are treating as deductible supplies. You can't provide reports to shareholders with the inventory value or cost basis. You can't put inventory on credit report applications. But you are allowed to track inventory for purposes of reordering and responding to regulatory requirements. It's not that we are pretending that inventory does not exist. It is that for tax purposes, we are expensing it if that is what we did for financial statement purposes and other requirements in the regs are met.
Unless the regs say you can't insure the inventory (and I don't recall seeing that), then I don't know why you wouldn't be able to insure it.
Ah, thank you. I thought you were talking about self-insuring that confused me.
Now I can't find where I read that doing an inventory count for insurance purposes was part of "books and records". It's not in the reg and not in RIA editorial materials. Might have been in a Tax Advisor article. Or I might have gotten my wires crossed, who knows.