Epublishing start up cost

[colohu]

I have a client who used an epublishing company to publish a book. Royalties have been received which will be included on Schedule C but I am not certain how to handle the start up - amortize based on copyright? what is the lifetime of the copy right - previously 28 years but not so now. Amortize as start up cost?

[Gary2]

Exactly what were the startup costs?

And are you sure it's a schedule C? These days, the low cost of e-publishing has created more and more authors, but a single published book does not a business make. It could belong on Schedule E as royalties, or as hobby income - as many of these efforts turn out to be.

[colohu]

epublishing

The schedule C I am certain about as opposed to Schedule E. Rhe hobby portion of your response (for which I am grateful) I am weighing.

However when I say the start up cost is substantial I mean substantial - $15,000! Royalties received in 2011 (year of start up) total $1,000.

[colohu]

To clarify costs were $5,000 for book service which includes copyright - $10,000 paid for publicity.

[Burke]

Copyrights are amortized over the lesser of the legal life or the useful life of the copyright. If you are dealing with only one book, it is a lot easier. Capitalize the publicity costs and take proportionately as books sell against the royalties as an expense. Are you using Sche C because the book relates to his ongoing business? I would use that only if he were selling the books himself. Royalties would go on Sche E.

[colohu]

Epublishing

Your advice is well taken and makes sense. However see below for self employed writers (he receives a 1099)

In most cases you report royalties in Part I of
Schedule E (Form 1040), Supplemental Income
and Loss. However, if you hold an operating oil, gas,
or mineral interest or are in business as a
self-employed writer, inventor, artist, etc., report
your income and expenses on Schedule C
Schedule C-EZ (Form 1040).
Pub 525 2011 page 16

[Burke]

I would agree with this if it were his only occupation. I was assuming (shouldn't do that) that writing was not his primary occupation.

[JG EA]

Your advice is well taken and makes sense. However see below for self employed writers (he receives a 1099)

In most cases you report royalties in Part I of
Schedule E (Form 1040), Supplemental Income
and Loss. However, if you hold an operating oil, gas,
or mineral interest or are in business as a
self-employed writer, inventor, artist, etc., report
your income and expenses on Schedule C
Schedule C-EZ (Form 1040).
Pub 525 2011 page 16

Look at Revenue Ruling 68-498
"If an individual writes only one book as a sideline and never revieses it, he would not be considered to be 'regulary engaged' in an occupation or profession and his royalties therefrom would not be considered net earnings form self-employment."