start up costs

Technical topics regarding tax preparation.
#1
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
Bunch of individuals form a partnership.

They are setting up their business currently.

payroll is about 20k per month.

they are buying equipment

no sales force yet, as they are not ready until 2022 to start promoting and selling their product.

Is client locked into classifying these costs as start up costs and amortizing all but 5k over 15 years?
 

#2
Posts:
2656
Joined:
28-Apr-2021 7:00am
Location:
FL
Is there any R&D?
Steve
 

#3
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
i don't think so
 

#4
Posts:
2656
Joined:
28-Apr-2021 7:00am
Location:
FL
No income probably means not in business, which in turn means expenses must be capitalized.
Steve
 

#5
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
they formed an LLC, they have staff, they need to install the equipment for a few months, and then get a sales force

so it looks like these are start up costs they have to be amortized over 180 mos except for 5k.

jsut wanted to confirm

sort of stinks to have this dynamic
 

#6
Nilodop  
Posts:
18754
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
they are buying equipment. That's not a 195 cost.
 

#7
Posts:
2656
Joined:
28-Apr-2021 7:00am
Location:
FL
The rationale is to at least try to treat purchasing and start up entrepreneurs equally.
Steve
 

#8
Coddington  
Moderator
Posts:
2566
Joined:
21-Apr-2014 8:50pm
Location:
Fort Worth, TX
Nilodop wrote:they are buying equipment. That's not a 195 cost.


Correct. It’s an asset waiting to be placed in service when the trade or business commences.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 

#9
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
that's very helpful...ty!
 


Return to Taxation



Who is online

Users browsing this forum: artp, beardenjv, ChrisGCPA, CPA1, deniz, Google [Bot], Google Adsense [Bot], GRobCPA, JAD, kyle242gt, rbynaker, taxtothebest and 196 guests