Necessary or ordinary business expense

[peggysioux]

Sole proprietor of a senior care center joined a membership at a fee of $5,950 to purchase furniture/supplies at a reduced price. Sole proprietor was purchasing an entire house of furniture for the new business. I don't think this fee would be considered deductible, but wanted to run it by other tax preparers to get their thoughts.

[Chief]

There's more

to this than your client is telling you.

[Bucky]

If the fee is saving her money and it was for the business it would be a deduction. Even if it didn't end up saving her money it should qualify. No one said you had to make smart decisions. I write off my Sam's club membership fee and I usually spend more then I intended each time I go to that place.

[jainen]

Sam's Club

>>I write off my Sam's club membership fee<<

Sam's Club charges an annual fee. Is that what this $5950 covers, a single year? I would consider whether it might not be a non-depreciable intangible asset.

[ChEAr$]

Amortizable

>>I write off my Sam's club membership fee<<

Sam's Club charges an annual fee. Is that what this $5950 covers, a single year? I would consider whether it might not be a non-depreciable intangible asset.

at least. But $ 5,950 is a bit high I think. Costco and Sam's are cheaper.

[Zee]

at least. But $ 5,950 is a bit high I think. Costco and Sam's are cheaper.

I've seen these clubs advertised. Supposedly, member's can purchase big-ticket items like furniture & appliances at very large discounts. I'm not sure of the full line of products available. The fee to join is very high. My guess is this membership is part personal/part business.

[peggysioux]

The fee

is for a two-year membership for Direct-Buy. Being the client was furnishing a complete house for a senior citizen care facility, she thought the discount she would receive when purchases the furniture would surpass the cost of membership. Deductible??

[Zee]

is for a two-year membership for Direct-Buy. Being the client was furnishing a complete house for a senior citizen care facility, she thought the discount she would receive when purchases the furniture would surpass the cost of membership. Deductible??

I would consider this a valid business expense. If the business is cash-basis or accrual-basis taxpayer? If accrual, the most conservative approach would be to consider 1/2 of the fee a prepaid expense since it's a two-year membership. If cash-basis, I'd deduct the entire amount the first year.

[ChEAr$]

Yet another possibility

is to include the one time fee in cost for the furniture, since that was primary reason.

That way, it's section 179 all the way!