Intangible Assets

[ConnorandCo]

Good morning, what would be the correct way to account for the cost of workshops?
A person creates a company for flipping houses, and they attend real estate workshops that cost 40K. I would think that would be amortized over 15 years? You wouldn't expense that over one year would you?

[kathyc2]

Good morning, what would be the correct way to account for the cost of workshops?
A person creates a company for flipping houses, and they attend real estate workshops that cost 40K. I would think that would be amortized over 15 years? You wouldn't expense that over one year would you?

Does the 40K meet the ordinary and necessary test to even be deductible? If it were me, I would think through how I could defend it being "ordinary" b4 I would put my name on the return.

The 40K is more than the cost of tuition for a Bachelor degree at a state college which would not be deductible as a business expense.

[DaveO]

It would seem that the seminars would qualify the attendee for a new trade or business and thus be non-deductible. They should have flipped a couple of houses first then attended the seminars to improve their skills. I represented a realtor in an audit a few years back. I didn't do the return and the preparer who did refused to represent him. The realtor called the auditor up and gave him a piece of his mind reminding him that taxpayers such as himself paid the money to support the auditors inflated salary and benefit package so my work was cut out for me.

The realtor had attended a number of very pricey seminars relating to selling homes out of foreclosure. The auditor rightfully questioned if the seminars were "needed" since the realtor had never made any real money selling homes and lived off of inherited money and his wife's income. Despite the realtor being a truly unpleasant person his records were solid if unorganized. I pointed out that in this case ordinary and necessary means merely useful and that the realtor had indeed moved homes out of foreclosure and since the real estate market was in free fall he was positioning himself in the sector most likely to return a profit. We walked with a no change. The preparer had left plenty of deductions on the table but I would have had to install a sneeze guard on my desk to have made it through another meeting with the realtor.

[ConnorandCo]

That is what I was concerned with, however I was hoping to possibly classify it as start up expenses. "An analysis or survey of potential markets, products, etc." or possibly "travel and other necessary costs for securing prospective distributors, suppliers, or customers?

[DaveO]

That would seem a bit of a stretch unless there was a clear nexus between the seminars and the various contacts used in the business that would represent a customer list of some sort. No doubt he jumped before asking questions.