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Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Finance
Satisfied Customers: 41220
Experience:  NASD Licensed Rep, 1997-2001, Business Attorney
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I paid about $15,000 for writing services for a blogger to

Customer Question

I paid about $15,000 for writing services for a blogger to contribute to a startup website where I was president, but received no salary. (I was employed elswhere earning a modest salary.) The website was owned by someone else. Can I deduct these payments as business expenses?
Submitted: 4 years ago.
Category: Finance
Expert:  Dimitry K., Esq. replied 4 years ago.
Thank you for your question.

I am sorry, I am a bit confused. Did you own the business, or did you simply contribute the funds to start-up the site?
Customer: replied 4 years ago.
I served as the president of the site, but did not own it. However, I personally contributed the funds to pay this contributor.
Expert:  Dimitry K., Esq. replied 4 years ago.
Thank you for your follow-up.

If you were not an owner then you cannot deduct it as a business expense. Only owners, or even part owners can really deduct expenses stemming from the running of the business. You can set it up as a bad loan, possibly (a bad investment), and write off $3,000 a year, but it is not a business expense since that was not your "business"--you did not own it.

Good luck.
Customer: replied 4 years ago.

Thank you, XXXXX XXXXX I were a part owner of the business would it be fully deductible?

 

And is there a reason you've mentioned that if it's classified as a bad loan that only $3,000 would be deductible per year?

 

Thank you!

Expert:  Dimitry K., Esq. replied 4 years ago.
You are most welcome, happy to help.

If you were part owner at the time, then yes, your investment into the business (and this could be deemed that), could be deducted as a business expense. The reason I mentioned a $3,000 limit is because the IRS has a set limit on what can be written off a year as a "capital loss", which is what this can be listed as. This is directly off the IRS website:

Limit on deduction. Your allowable capital loss deduction, figured on Schedule D, is the lesser of:
  • $3,000 ($1,500 if you are married and file a separate return), or

  • Your total net loss as shown on line 16 of Schedule D.

You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit.

Here is the full link:

http://www.irs.gov/publications/p17/ch16.html

Good luck!
Customer: replied 4 years ago.

Thank you, XXXXX XXXXX clarification. What proof do I need that I was part owner?

 

 

Expert:  Dimitry K., Esq. replied 4 years ago.
You need a state filed form such as Articles of Incorporation that show you to be listed as part owner. If you never filed anything with the State, I am afraid that you would not be listed as owner, especially if this start-up was formally incorporated.

Good luck.
Dimitry K., Esq. and other Finance Specialists are ready to help you
Customer: replied 4 years ago.
Thanks for you help!
Expert:  Dimitry K., Esq. replied 4 years ago.
You are most welcome and good luck to you!