client writing a theater musical

[nwtaxlady]

My client is taking an old movie and making a theater musical. In 2018 he did all the things I told him to such as business plan, seperate checking account in business name etc. In 2018 he had few expenses such as copyright lawyer fees & office supplies which I put all as start up expenses. Now in 2019 he has and still is paying a gentleman to score the music. Then my client does the orchestration (figures out what instruments to use, etc.). Its a long process. I already had him issue 1099's. So now my question is, what do I do with all the expenses incurred in 2019? The 2 major ones is, what he paid the guy to do the scoring (which he is not done) and then paid a guy to build his website of about $2600. Are they still start up expenses? Total expenses for 2019 is about $6,000 but of course no income yet. Capitalize and if so how long? Thank you.

[ATSMAN]

I am assuming there is 0 for Gross Receipts(line 1 Sch C). right? Capitalize over 15 years!

This is just my gut reaction, but please do some research if authors and musicians have some special rule that applies.

[nwtaxlady]

Correct, zero income. So when capitalize over 15 years, then is it Straight line for 15 years? And is there an amortization code I need to put? Such as Sec 197 intangibles, is that right?
Thanks

[New York Enrolled Agent]

Personally, I really have NO knowledge of this but check out IRC section 181. It may or may not be applicable given your circumstances.

[nwtaxlady]

No, he is not making that election under IRC 181.

[Rapid Robert]

paid a guy to build his website of about $2600.

Is that even a business expense? What is the ordinary and necessary business purpose of the web site, if it is not generating any revenue? And with, for example, Broadway theaters in NYC closed for another year, what reasonable expectation of any profit is there?

Sounds like an expensive vanity hobby.

[Lion]

You probably want a mentor or at least a specialized message board for tax preparation for clients who create art, music, theater, write books, etc. It could be a great niche market, but you'll want to study.

[ATSMAN]

You probably want a mentor or at least a specialized message board for tax preparation for clients who create art, music, theater, write books, etc. It could be a great niche market, but you'll want to study.

I had the opportunity to prepare the tax return of an international hockey player who had both US and Foreign income from several European countries. After looking at the paperwork and translation involved I decided to stick with US tax returns only for professionals. Niche market can be lucrative but you need the knowledge and support to do the tasks. I am a one person shop with a part-time support during the season, so I would be stretched very thin and the risk of making serious mistakes outweighs any gains.