From YPPedia
The item trash warning screen

Trashing an item is an easy way to get rid of it without having to sell it or give it to another player. To trash an item, click on an item in the booty panel and then click the "Trash" option in the item menu. You will be presented with a warning screen. Once an item has been trashed, it is gone forever. Be sure that you do not want the item before trashing it.

Some items cannot be trashed. These include:

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