Purchase of distribution rights

[BP.]

Former client wants to have his 2015 taxes prepared so he can deduct the $5,000 he spent in purchasing the rights to distribute in a certain territory.

He's not yet in business, and there was no business concern last year. I don't see this as deductible in 2015, nor even as amortizable start up costs in 2015- TTB 8-18.

Looks more like 180 month amortization once the business begins- TTB 9-10 & 11.

The right track? Thanks!

[kathyc2]

Former client wants to have his 2015 taxes prepared so he can deduct the $5,000 he spent in purchasing the rights to distribute in a certain territory.

He's not yet in business, and there was no business concern last year. I don't see this as deductible in 2015, nor even as amortizable start up costs in 2015- TTB 8-18.

Looks more like 180 month amortization once the business begins- TTB 9-10 & 11.

The right track? Thanks!

Is the right to distribute open ended? If the contract is only for a certain number of years, I'd amortize over those years instead of 15.

[BP.]

kathyc2- thanks for your input! Still won't start until he begins business though, right? i.e.- not 2015.

[kathyc2]

kathyc2- thanks for your input! Still won't start until he begins business though, right? i.e.- not 2015.

I would agree to not take in 2015. It might help to explain to client that a deduction (business loss) in 2015 would only offset FIT, but the deduction in subsequent years would lower both FIT and SE tax.