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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1818
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Hi.. how are you? I am going to London and want to purchase

Customer Question

Hi.. how are you?
I am going to London and want to purchase a 'franchise' to teach facial fitness. Basically, the creator of the method is giving me the right to teach her 'method' and use her name. For the past 27 years I have had a distributorship with a health and nutrition company. I don't have a corporation.. I just file as a sole proprietor. Since I am already in the 'wellness industry'.. I think facial fitness could be considered to 'add' to my current business, rather than considering it to be a new business. I know new businesses have different rules (like you can't write off the initial license fees). Can I write this off? And what would the receipt I receive need to say? The cost is 12,000 pounds ($19,200) of which 2000 pounds of the cost is for V.A.T.(value added tax). Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  Shawn P Adamo replied 2 years ago.

Shawn P Adamo : Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. CPA,PFS,QFP,GMMA.
Shawn P Adamo : Your business can be involved in SEVRAL areas. You do not need a New set of rules for every new business are you get into.
Shawn P Adamo : If you start selling bandanas that you import from south America you can lust them on your current website or not.
Shawn P Adamo : The fact that you seek them just means you need to do accounting for them
Shawn P Adamo : While this NEW area of business may be different than what you are used to and may involve different advertising etc the accounting is all the same.
Shawn P Adamo : I don't know where you got this information. About franchise fees but you CAN write them off
Customer:

Thank you Shawn. I was told in the past by a CPA that 'initial' training costs to start a new business (like the cost of going to real estate school for example) cannot be deducted.... but thereafter.. the continuing education WAS deductable. Similarly, I read the following answer to this question on the internet:

Customer:

I have read the other responses, before me, but I have to add a caveat.

If the professional license is the original, or first, license in your new profession, it is not deductible. For example, my first CPA license, as I recall, was $50 (does that age me?), and it was not deductible.

If the professional license is a renewal, yes, it is deductible, as my Yahoo colleagues have suggested.

Phillip S Foster CPA
Dave Ramsey Endorsed Local Provider..

Customer:

OK.. so the lady in London is giving me a 'training'.. and her approval i.e. 'license' to use her name and method' (which I would say is selling me a 'franchise') so I am confused about what should be on the receipt.. to make sure it is legally tax deductable.

Customer:

Thank you.

Shawn P Adamo :

It needs to be made out in the name of the business, dated, the amount clearly stated, and the reason (explnation for the payment), as well as being on their letterhead.

Shawn P Adamo :

Then of course if you are ever audited, you have the receipt.

Shawn P Adamo :

Just to be clear that an itial franchise fee is deductible please see the link: http://www.irs.gov/publications/p535/ch08.html#en_US_2011_publink1000208966

Shawn P Adamo :

This is from IRS publication and if you look at section 179 depreciation ist clearly states that the "..initial franchise fee is subject to amortization over 180 months . Thus you CAN CLEARLY take the initial franchise fee and expense it over 15 years!!!

Shawn P Adamo :

If this does not answer your question please let me know. Also let me know if you have additional questions.


This is my full time job and I only get paid if you accept my answer. We work on the trust system at JA.


If you understand my answer and have no more questions, please accept and please eave positive feedback (if so inclined). Thank you.

Shawn P Adamo, Retired CPA
Category: Tax
Satisfied Customers: 1279
Experience: Retired CPA
Shawn P Adamo and 10 other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Dear Shawn,


 


I have another question regarding our previous conversation. I went to London and took the course. I understand that 'start up' fees or 'capital expenditure' can be written off at up to $5,000.


the first year and the balance amortized over the next 15 years.


 


OK, I got that. I had to take $27,000 out of my retirement account to pay for this (SEP). Of course that withdrawal is considered income.. and I have to pay the tax on it. My question: Because the new business is 'facial fitness'.. and I am already in the 'health industry'.. is there a way that this could be considered a business expense by way of 'expansion' of my current business.. allowing me to write off more of the cost at one time? Other wise I have to pay a lot of taxes on April 15th. The only way I would be able to cover the additional taxes.. will mean selling more of the shares in my SEP.

Customer: replied 2 years ago.
Relist: Other.
I did not get an answer from Shawn Adamo .. Is he still with your company as an accountant?
Expert:  Lindie-mod replied 2 years ago.
Hi, I’m a moderator for this topic and I wonder whether you’re still waiting for an answer. If you are, please let me know and I will do my best to find another Professional to assist you right away. I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you. Thank you!
Customer: replied 2 years ago.

I began a conversation with an accountant on this site by the name of Shawn Adamo in April of this year, on this site. I ask him a follow up question a week ago.. and he has not answered.


 

Expert:  Lindie-mod replied 2 years ago.
Thank you for your continued patience. We will continue the search for a Professional for you.
Expert:  Anne replied 2 years ago.
I apologize for the delay in answering your question.

It is preferred that you start a new thread if your follow up questions are not closely related in time to your initial posting. That will post your question on the "open board" for any expert available to answer, instead of staying in the original expert's que, as happened here,.

By posting a new thread, not only do you receive faster service, but every expert gets credit and payment for their work.

Ok.....as for your question, I can find nothing in any of the IRS literature that would prevent you from writing off the expenses in full in the year you incurred them (which I assume is this year)

In fact, I think you can make a strong case for Research and Experimental Costs which supports your position of deducting up to $5000 in the first year, and amortizing the rest over 15 years.

This would be true if this was the first year that you started the facial fitness, or you were expanding your existing "health industry" business to include he facial fitness.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.




Customer: replied 2 years ago.

Dear XXXXXe,


 


I don't understand your reply very well. In one paragraph you say 'you can't find anything that would prevent me from writing off my expenditure in full.. the year I incurred them', but my expenditure was $27,000 not $5000. I am trying to find a way to write off more (legally of course).


Is the allowable tax deduction for funds used to 'expand' an existing business.. different than funds


used to start up a 'new' business. I read the rules for IRS 535 .. but am not sure if there is a difference.

Expert:  Anne replied 2 years ago.
I apologize.....I worded those sentences poorly . I was agreeing that you could write off $5000 of the start up costs.

You mentioned that you went to London in order to get the information ,etc about opening the facial fitness, and that since you were in the health business, this would not be a different business. That means that all of the expenses you incurred going to and coming from London, along with the cost of the VAT tax and another expenditures (except for the previously mentioned franchise fee) is fully deductible.

If you have an office in your home, and you go to a store to purchase something you need for your business, (such as postal supplies for example) that makes that trip totally deductible, and the mileage allowance for 2012 is 55 cents per mile, and that can add up quickly.

Again, I apologize for not being clear in my first answer, and I truly hope this information is helpful. Please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

 

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1818
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 10 other Tax Specialists are ready to help you
Expert:  Anne replied 2 years ago.
Thank you very much for the accept, the good rating, and your generous bonus!

Please feel free to ask for me by name if I can help you in the future.


****Please DO NOT accept this answer as you will be charged again. I just didn't have any other way of thanking you. **********

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