New Business

[S T]

Well The Taxpayer Says it is

Received the tax package from the t/p and reviewing and entering on computer, then I finally get to the bottom of the paper work, and find this sheet, Everything was just fine and per normal on this client until then.

T/P says I started a new business, well it is just in the organizational stage and I am getting my training and setting up my "team". The business is helping people to invest "Real Estate and Paper Assets" Then I find a list of expenses for 2008

training Real Estate $35,000
training Stock and Investments $16,000
Coaching $5,000
Software $ 160
Business Expenses $1,000
(I rounded numbers, t/p had listed actual)

Well I won't state my first thought! Next thought is and "what am I suppose to do with this, and then how am I going to explain this to the client" To make matters even worse than posted above, t/p cashed out a $53,000 IRA. He would have been better off to leave it in the Vanguard Fund and only lose 50% of it.

Since the business did not commence for 2008, is it possible that these expenses will qualify as "Start Up Expenses under Sect 195, presuming that t/p starts this business in 2009?

Sandy

[DTS]

Sandy

You helped me with a situation just like this some years ago. If you remember, my gal had huge expenses like this, but the difference on mine was ready for business near the last qtr. of the year and I allocated expenses between startup and expensing. I think she was trying to sell yak oil or something.

Amazing what people are willing to waste/spend money on. I'm with you, I bet the IRA minus 50% looks great right now.

Dennis

[Snaggletooth]

Bilked

Sandy I hope your customer wasn't bilked by one of those late-night infomercials.

"Let us show you how to find real estate for nothing and sell it for a fortune. There is so much of this real estate out there, you could hire a staff just to process it through your new company. In fact, we will send you a list of such property in your area every 60 days as it becomes available!!!!"

I remember watching one particular guy years ago. My better half (Callie) goes to junk sales and finds this guys' books on the stack of junk from time to time.

[erchess]

I guess

I would want to ask the client whether he did anything in 08 that did bring in or had the potential to bring in revenue for his business. If so, he could consider that he opened for business in 08 and the expenses incurred or pad after opening for business would be currently deductible.

I have extensive experience losing money in network marketing but one thing all the programs I even looked at had in common was that there was NOT supposed to be this long period of spending money and doing training without having income. Instead one was supposed to make money the first week and while I found various reasons why it was tough to make a profit in the long run most distributors made some income inside their first couple weeks in the business. Maybe he is in a program that works differently but I sure would check with him.

[Jesse]

Since the business did not commence for 2008, is it possible that these expenses will qualify as "Start Up Expenses under Sect 195, presuming that t/p starts this business in 2009?

Sandy

This is my first intuition.

For discussion purposes, what if they do not end up starting a business?

I think next year I will have a few similar, one "real estate professional", I'm wondering if he watched the same infomercial as your client?

And several online sales of some type - you can deduct everything including the kitchen sink if you start this business and try to sell type thing - sounds like another pyramid scheme.

[Davc]

Many of those expenditures sound like education for a new trade or business which is not deductible at all.

[Gene V]

Many of those expenditures sound like education for a new trade or business which is not deductible at all.

I agree, the real estate training $35,000
and investment training 16,000 would be non deductible unless some of
these courses were taken at qualified education institution.
Not sure what the coaching expenses are.

[erchess]

That's another little point

Usually in network marketing the charges are supposedly for the right to be affiliated with the company and marketing materials. Any training and coaching prior to your first income is normally "free".

[Lion]

Coach

It's popular now for people to have a business coach or a personal coach or a success coach. It might've been personal, like talking her through her decision and building enthusiasm for her new venture. It might've been start-up, like training or building in a certain area such as marketing or leadership. It might be ongoing. You'll have to ask her what type of coaching she received and for what purpose.

[Jesse]

Many of those expenditures sound like education for a new trade or business which is not deductible at all.

Excellent point, well taken!

[joanmcq]

I'll take any bet that none of these 'classes' were at an acredited institution. For that money, he could have bought a house or two or three depending on the area of the country and started his real estate empire. And made some money for real.

the people selling these seminars are millionaires, I'm sure. But at $35K + a pop, doesn't take too many suckers before you're a millionaire.

[S T]

Talked with Client

So here is the latest and greatest news.

It is part of "Rich Dad" and "Wealth Intelligency Academy". For the fees that are paid for this, I believe I am in the wrong business!

The fees are for various different courses at different levels. So question is whether or not the business was started and then once the business commenced are the courses deductible to further add to the viability and services of the business? Much the same as continuing education, related fields, etc.

The example the client gave me is that he paid $495 to start the business, but it was not income producing since it was done in 12/08, and then paid for all of these additional modules of courses to add to this business service.

Is this education or is it start up?

Sandy

[Black Bart]

So here is the latest and greatest news. It is part of "Rich Dad" and "Wealth Intelligency Academy". For the fees that are paid for this, I believe I am in the wrong business! The fees are for various different courses at different levels. So question is whether or not the business was started and then once the business commenced are the courses deductible to further add to the viability and services of the business? Much the same as continuing education, related fields, etc. The example the client gave me is that he paid $495 to start the business, but it was not income producing since it was done in 12/08, and then paid for all of these additional modules of courses to add to this business service.

Is this education or is it start up?

Sandy

I don't know which it is, but is it possible for you to give this guy's stuff back and send him to a chain?

No matter how IRS views it (and we have an idea about that) or what the fees are called, he's invested a big chunk of his life's savings and will likely demand (aggressively) every last cent be written off, especially since salesmen emphasize: "It's 100% deductible." The last pyramid I ever did (an "Amway"-style something) was audited within a year (I stupidily filed a loss in the gross which, as you know, says merchandise was sold below cost). I don't remember exactly what her "fees" were for (and amounts were very minor compared to yours), but she later gave back half the kitchen sink claimed.

Those things are just a continuing worry for preparers until around the third year or so when the project begins to die off as they finally admit to themselves (and to the spouse) that there's no hope of ever recovering their money -- much less making a profit.

[Bucky]

check out this site

http://www.ripoffreport.com/searchresults.asp?q1=ALL&q5=Wealth+Intelligence+Academy&submit2=Search!&q4=&q6=

These are people that got ripped off from that course etc.

[Black Bart]

Giving it

So here is the latest and greatest news. It is part of "Rich Dad" and "Wealth Intelligency Academy". For the fees that are paid for this, I believe I am in the wrong business! The fees are for various different courses at different levels. So question is whether or not the business was started and then once the business commenced are the courses deductible to further add to the viability and services of the business? Much the same as continuing education, related fields, etc.

The example the client gave me is that he paid $495 to start the business, but it was not income producing since it was done in 12/08, and then paid for all of these additional modules of courses to add to this business service.

Is this education or is it start up?

Sandy

another shot.