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I sold my business and have about $100k in Capitol gains…

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I sold my business...

I sold my business and have about $100k in Capitol gains tax. I want to start a new business, will the start up cost reduce the Capitol gains bill?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

New business will be a branded boutique with some manufacturing.

Submitted: 4 months ago.Category: Tax
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12/7/2017
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
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Hi, my name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

If you spent less than $50,000 in start up costs then you can deduct up to $5,000. Any amount in excess would be deducted over 15 years. If you spend more than $50,000 the $5,000 amount is reduce dollar for dollar. So If you spent $52,000 you would be able to claim $3,000 and deduct the remaining amount over 15 years.

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Customer reply replied 4 months ago
maximum amount is $5000...for an expenditure of $50k.....I expect to spend about $150k
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

Did you start the business yet?

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Customer reply replied 4 months ago
Just trying to figure out how much to spend before end of year for 2017 taxes.
Customer reply replied 4 months ago
Stared the new business the month I sold the old business, November 2016.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

The start up costs would begin be amortized once the active trade of business commences.

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

What kind of entity did you form (LLC, Corporation, S-Corporation). Generally what type of expenses make up the $150K?

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Customer reply replied 4 months ago
Did an LLC, graphic artist for branding, purchasing of photo types for manufacturing copies, travel to manufacturing sites, website, marketing, office....the usual....
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

The reason that I was asking was that I was trying to determine if any of these expenses could be deducted.

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Customer reply replied 4 months ago
Is there items that the cost are a given deductible?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

Have you started generating sales? If so approximately when?

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Customer reply replied 4 months ago
No sales yet, still setting up the business.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

Start up costs will vary business to business. The key point is when you start active operations. This would be when you could start amortizing the start up costs. There is an audit risk if you initial have a large amount of operating expenses with no revenues.

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Customer reply replied 4 months ago
Not operating costs, the significant cost is to start production of branded items for a location specific: towels, glassware, dinnerware, cards, flags, center pieces, silver items.....all with logo of the location.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 4 months ago

Unfortunately, you would not be able to start amortizing the start up costs until you actively begin the business.

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