8-18 of TTB "What if business never starts"?

[AZ-Tax]

"Cost incurred in attempt to acquire or begin a specific business are capital expenses and can be deducted as a capital loss"

My client paid money for a courier route but the business failed. Client received no residual value for route. I would not consider this start up cost so is the total amount paid to purchase the route 100% deductible in tax year? If so is the loss reported on Sch C (sole proprietor) or Sch D?

[erchess]

Why

would you not consider this a startup cost? To me it seems clear that it would be a startup cost. If it is a startup cost then you would deduct it on Schedule D. As for deducting it on Sch C while this is not impossible I believe it might be an audit flag.

[AZ-Tax]

If Capital Loss, what type on Sch D?

If I select "personal loss on non investment property" it disallowed the loss. Would this be considered a "worthless" type?

[erchess]

It's right to disallow

"personal loss on non investment property". That is indeed non deductible. How about an ordinary transaction or worthless security? The absolutely best answer would be to call tech support at your software company. If they don't have a good answer to a question of tax theory perhaps you have the wrong software.

[AZ-Tax]

erchess...I called tech sppt a while back and

found out there was a Sch D worksheet that expanded the Sch D types. I appreciate your help on this.

[erchess]

You're welcome

I hesitated to respond to your post because there are people on this board who know more about startups that do and do not open for business and about Sch D than I do. I have gotten into some pretty unusual situations with rental properties and Schedules C and F and Farm Rental but I have had only one client who started a business other than Sch C on my watch and that business did open its doors. On Sch D I have done only regular and short sales of ordinary exchange listed stocks that did not qualify for the section 1244 benefits and did not even include very many options and straddles. The thing about taxes is that anyone who can read technical information and has access to enough information can write a return correctly.

May I suggest that you private message bees to see if I have pointed you in the right direction? I really wish someone else had jumped in if only to confirm what I thought.

[AZ-Tax]

Regardless which way I go...

I think we can all agree the Courier route (similiar to purchasing a franchise) needed to be purchase for the business to operate therefore its considered "start up" exps. This intangible asset needs to be amortized 15 yrs and on 50K, its comes out to a little over $3000/yr vs. Capital loss on Sch D is $3000/yr.

Now the question is what about the fuel exps and rental exps they encountered after purchasing the route? I am leaning towards Sch C deductions?

Or do I combined those exp with the $50K route purchase and enter it on the Sch D?

You thoughts?

[Bees Knees]

If the business never started, it ALL goes on Schedule D, just like the instructions keep telling you to do.

Schedule C is never used until you have an ongoing business.

[AZ-Tax]

What is considered on going?

If the business actually operated for a short while but generated no income, is that considered on going?


If not, then what if the business operated for a short while and generated some money?

Either one of these considered on going business?

[erchess]

Open For Business

As I understand it, a business is considered to have commenced when it begins to seek revenue. For example a physical store commences when it opens the doors to the public even if no one comes in. So the question is whether your client actually sought revenue. I had gotten the idea from your earlier posts that he did not actually get around to seeking revenue