Discussion:Expenses after close of business, lawsuit, 195 amortization

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Discussion Forum Index --> Advanced Tax Questions --> Expenses after close of business, lawsuit, 195 amortization


Discussion Forum Index --> Tax Questions --> Expenses after close of business, lawsuit, 195 amortization

Donniecastleman (talk|edits) said:

21 February 2012
Hi everyone, have two situations for the same client, just got off the phone with a guy that speaks broken English in the IRS tax law department that is really good at reading IRS publications with no relevance to my question.

1. Client closed self employed real estate business in 2010. Sued in 2011 for $4,600 in rent, mls, listing fees paid by real estate office, bank account levied for this amount. Where should we property take the deduction?

2. Client is closing a website search engine business this year and has leftover Section 195 Business Startup Expenses being amortized, what do we do with the balance left over?

Thanks, I have my suspicions where to deduct but wanted to measure twice, cut once. Hope everyone is keeping their sanity this tax season.

CutlerBayEA (talk|edits) said:

21 February 2012
1. Assuming cash basis, you could place it in 2011 as unreimbursed business expenses. Another option would be as non-business bad debt, but that wuld limit you to $3,000 short term capital loss.

2.Start-up expenses can be fully deducted in the year in which the business is liquidated if they have not been fully amortized.

Ckenefick (talk|edits) said:

21 February 2012
1 - You should properly take the deduction on Schedule C. All income relating to this activity went on C and so should all deductions. Use the "relation back" or "origin of claim" theory, or whatever you want, but I'd put it all on C...and the case law and guidance supports this position.

2 - I agree w/ Cutler.

Donniecastleman (talk|edits) said:

21 February 2012
Ok awesome, thanks! Looks like Schedule C is around for another year.

Nbcpa (talk|edits) said:

22 February 2012
Agree with Ckenefick 100%

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