how to write off business buyout cost? help!!

[MikeTAX]

I've been scarched my head for several hours for this topic.

I have a customer who just bought a business for $22000. Can anyone tell me what is the best way to write off this on Sch C? Will this qualify for start up cost? Or is there a better way to do this?

[TAXBILLY]

Have you read this?

http://www.irs.gov/pub/irs-pdf/p583.pdf

taxbilly

[MikeTAX]

Have you read this?

http://www.irs.gov/pub/irs-pdf/p583.pdf

taxbilly

Yes, I read this already. But in it, there is no detail about what I can do with this $22K that the customer bought out "existing" biz. Most of them listed on p583 & p535 are telling me what should or shouldn't deduct for the start up cost. Bought out cost $22K is not part of the "start up" since they didn't meet the 2 test on pub 535. ch7. I wonder anyone knows if this bought out can be duductable or not........ do you? If so, where should I put them in Sch C? Bummer!!

[grandmabee]

Yes, I read this already. But in it, there is no detail about what I can do with this $22K that the customer bought out "existing" biz. Most of them listed on p583 & p535 are telling me what should or shouldn't deduct for the start up cost. Bought out cost $22K is not part of the "start up" since they didn't meet the 2 test on pub 535. ch7. I wonder anyone knows if this bought out can be duductable or not........ do you? If so, where should I put them in Sch C? Bummer!!

What is included in the "buy out cost" is this the inventory? or supplies? We need detail on what you consider "buy out COst"

[MikeTAX]

What is included in the "buy out cost" is this the inventory? or supplies? We need detail on what you consider "buy out COst"

this $22K buy out cost is just a one time fee to buy existing store, SPA, more like turn key fee, includes everything. Do I have to break it down in details then? Customer told me no list, just $22K for this Spa biz.

[JohnH]

You need more information.

How did they arrive at $22K?

Did the seller just say "Give me $22K" and the buyer wrote a check?"

It's difficult to believe there wasn't something in writing.

It isn't up to you to allocate the purchas price - that's the client's responsibility.

[Lion EA]

The buyer and seller will need to include the asset acquisition form with both of their returns, so they better pull out their contract or bill of sale or letter of agreement or whatever has the results of their negotiations re the purchase price, so your client can tell you what he bought for his money.

[lbbwest]

The buyer and seller will need to include the asset acquisition form with both of their returns, so they better pull out their contract or bill of sale or letter of agreement or whatever has the results of their negotiations re the purchase price, so your client can tell you what he bought for his money.

lion wins:

Instructions to Form 8594:

Who Must File target affiliates, whether or not actively Definitions Generally, both the purchaser and seller traded, other than actively traded stock must file Form 8594 and attach it to their Trade or business. A group of assets described in section 1504(a)(4). income tax returns (Forms 1040, 1041, makes up a trade or business if goodwill Examples of Class II assets include U.S. 1065, 1120, 1120S, etc.) when there is a or going concern value could under any government securities and publicly traded transfer of a group of assets that make up circumstances attach to such assets.

[Lion EA]

May I have a cinnamon bun from Mel for my prize?!