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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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This is primarily an accounting question. My client paid money

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This is primarily an accounting question. My client paid money to a consultant for advice and assistance in developing a marketing strategy. Is this payment considered a current year expense or does it need to be amortized over time.

The second part of the question is the treatment of the franchisee fees they receive. These fees are for the purchase of the franchise and do not include royalty payments. Is this revenue when the sale consummates or is this also amortized over time.

If they require amortization, how long are they amortized over

Randalltax :

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.

Randalltax :

Fees paid to a consultant for current advice are generally deductible as an ordinary expense in the year paid.

Randalltax :

Fees paid to me for this advice are deductible in 2013 !

Randalltax :

Franchise fees PAID OUT are generally amortized over a 15 year life regardless of the length of time of the franchise agreement. If the franchise agreement ends before 15 years, the unamortized amount is deducted in the final year of the agreement.

Randalltax :

Franchise fees RECEIVED are current year income. You cannot amortize income.

Due to a technical issue, I am reposting the response

Thank you for contacting me about your Tax issue. I will work hard to help you understand the issue clearly.
8/7/13 4:55 PM
Fees paid to a consultant for current advice are generally deductible as an ordinary expense in the year paid.
8/7/13 4:55 PM
Fees paid to me for this advice are deductible in 2013 !
8/7/13 4:57 PM
Franchise fees PAID OUT are generally amortized over a 15 year life regardless of the length of time of the franchise agreement. If the franchise agreement ends before 15 years, the unamortized amount is deducted in the final year of the agreement.
8/7/13 4:57 PM
Franchise fees RECEIVED are current year income. You cannot amortize income

 

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Customer: replied 3 years ago.

The franchisor company paid $30K to a company to do the leg work to develop and execute a marketing plan. That is also a current year expense correct.

It is a current expense.
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