Training Material

[lbe]

Client is in the process of creating a training manual and has incurred various cost associated with writing, research etc...in 2008 and will continue for the next couple of years. I was wondering if these cost should be expense or amortized. If amortized when do you start amortizing (date placed in service or date of completion) and for how many years etc.. any in sight will be help. Thanks in advance.

[Bees Knees]

From IRS Pub 535, page 42:

Education expenses. Ordinary and neces-
sary expenses paid for the cost of the education
and training of your employees are deductible.

The cost of a training manual is an education expenses. Deduct all costs as current expenses.

The exception would be if you purchased a business, or if you are first starting up a business. The cost of training employees before the business start date is a start up expense, in which you can deduct the first $5,000 and amortize the rest.

If you purchase a business, Section 197 costs must be amortized over 15 years. IRS Pub 535, page 27 says that employee training manuals are considered business books and records, which is included in the list of Section 197 amortizable costs.

Self created books and records, on the other hand, are not Section 197 costs since they are not purchased as part of the purchase price of a business.

Thus, if your client is not starting up a new business, or did not purchase the training manual as part of the purchase price of a business, the cost of creating a training manual is deducted as a current educational expense.

[lbe]

Training Material

Thanks for your response it was very informative. I was wondering if this client is an S-Corp and is developing the training material to sell to various organizations and not to be used in-house. They are going to have copy rights etc...does that change how you would handle it?

[Bees Knees]

If the training manual is being developed as a product to be sold to customers, then the costs are added to inventory and deductible as cost of goods sold at the time of sale.

[erchess]

Comment

I think the use of this board is at least as valuable as the printed and web based materials sold by TMI. I learn something every time I come to the board.

[Bees Knees]

I use TTB WebCD to find 99% of all answers I post on this message board. If the answer isn’t obvious in TTB, then I click on the link to the IRS Pubs or other citations to find the answers. For example, employee training manuals sounds like something that might be covered under business deductions. I click on Tab 8, business deductions. Then follow the link to page 4, business deductions, and then look under cross references. IRS Pub 535 is listed as a cross reference, so I click on that. Then I type in “training” into the word search feature. It then gave me the page 27 and page 42 references that I used to answer the question. When I type in the word “training” into TTB word search feature, I get page 8-17 as a hit under business start-up costs.

[S T]

Publishers of TTB

Do you suppose the publishers of TTB will once again post a tutorial on how to best use the WEB CD?

Sandy

[Burke]

If the training manual is being developed as a product to be sold to customers, then the costs are added to inventory and deductible as cost of goods sold at the time of sale.

If a client, in the course of his business, writes various books and then sells some at trade org conferences or on-line (for a minimal amt above cost), but also gives some to his clients in the course of their consultations, can the cost of production & publication be written off when the latter category are given out? The P&P costs are typically paid for by the writer up front. I think he gives away more than he sells.