Trucker sells truck pays early payoff fee

[LMathey]

I have a client who purchased a semi and car hauler two years ago. He financed it for five years. During 2007 with the cost of gas and inability to find another driver he sold the truck. When paying off the finance company he paid over $7,000 more than the amount shown as the balance on the loan amortization schedule. I assume this was some kind of penalty for paying off early. Is this deductible on his Schedule C? Since the finance company had to report it as income I would think so but wanted to see if anyone else had any ideas.

Thanks for any input.

[veritas]

Sounds like

interest to me.

[thomtax]

Really a serious question

This may sound like a smart aleck answer, but it is in no way intended as such. Instead of assuming that it was a penalty, why not just ask the trucker what it was for. If he doesn't know, surely he has the paperwork that shows why. It may work itself out with that info so that there is no question as to how to handle.

Good luck in resolving.

LT

[LMathey]

Payoff paperwork

No offense taken, I did ask. They got an email with the payoff amount. They never got any paperwork detailing what the additional charges were for. However, the amortization schedule did state that the balance shown there was not a payoff amount. When I questioned why it was different from the balance on the amortization schedule they did not know. They have called and emailed the lender (First Prime Capital in Charlotte, NC )trying to get me details and the phone has been disconnected.

I think I will just call it interest.

[thomtax]

They have called and emailed the lender (First Prime Capital in Charlotte, NC )trying to get me details and the phone has been disconnected.

I think I will just call it interest.

Sounds good to me. Of course, I don't claim to be an expert, but if for some reason it was challenged, and they wanted it put somewhere else, it should still be an expense and just changing categories should leave the same net taxable result.

And if the company is gone, what can you do? I would make notes of the efforts, jut for protection.

LT