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Ed Johnson
Ed Johnson, Tax Preparer
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I am starting a ticket broker business. I will be buying tickets

Resolved Question:

I am starting a ticket broker business. I will be buying tickets and re-selling them. I have started to buy PSLs (personal seat licenses) that give me the right to buy seats in future years at a pre-determined price. I think these PSLs would be considered business assets and want to run my thinking on depreciation by you. There are 2 types of PSLs: 1) PSL good "forever." My guess is that this type of asset should not be depreciated at all unless you sell the asset (and at that time take either a Capital gain or loss). 2) PSL good for a specified timeframe (e.g. 30 year PSL). Given the specified timeframe, it would make sense to me to depreciate the asset over the life of the PSL as the value would be reducing each year. Does my reasoning make sense?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

Dear XXXXX,

 

Thank you for a very interesting question. I need to know. When you purchase seat licenses, are yourse the exclusive rights? If you do not exercise the right, are the seats sold to others? or if you do not exercise the right, are they then sold to someone else?

 

These sound like you mean by seat license, that you have an option to buy. Can you verify that?

Customer: replied 5 years ago.

Hi. You are right that these are an option to buy. If I don't exercise the option, then the team will sell the PSL to someone else. The only slight tweak to this is that the PSL is something I can sell myself if I decide I don't want them any more. Most teams have PSL markets where you can buy and sell PSLs, or you can sell them on Ebay or some other market. The PSLs can be quite expensive. For example, the PSL I am buying with the Dallas Cowboys will cost me $14,000. Thus, I would always prefer to sell them rather than let them go if I decide not to purchase the seats in a given year. Good question!

Expert:  Ed Johnson replied 5 years ago.

Dear XXXXX,

 

These assets are not depreciable assets. They are intangibles that you can capitalize.

 

From the IRS website:

 

Intangible assets purchased after August 10, 1993, including agreements not to compete, franchise rights, business licenses, and patents, copyrights, trademarks, trade names, business goodwill, and going concern value that are acquired as part of the acquisition of a substantial portion of a business, must be amortized over the course of 15 years. (or shorter period if they have defined age)

 

When you sell the seats, then you may incur a capital gain or loss and report them on schedule D.

 

 

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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