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May I deduct expenses after I sold the company? I just sold…

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May I deduct expenses...

May I deduct expenses after I sold the company?

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

I just sold my business but I have expenses after the closing...ex: travel to inform employees about the sale, pay certain emply

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Employees a bonus after the sale,....

Submitted: 4 months ago.Category: Tax
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4/2/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,894
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

(By the way, if the site makes one of those automated call offers, that didn’t not come from me. However, I’d be GLAD to do a phone consult, but this comes with an additional cost, so don’t accept unless you’d like to talk)

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

Yes, you'll use schedule C to deduct the expenses.

...

You'll simply need to be prepared to show IRS that there were in deed business expenses, obligations you had as a result of an activity in pursuit of profit, and not simply personal obligations in disguise.

...

As an example, any indication of pleasure or personal use during the travel would be disallowed in an audit

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

What they might also want to see (again if you were audited) is that the sale price was adjusted for this, and that there was some sort of agreement that even though the business is now owned by a different owner, that these items remained a business obligation.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

Finally, as a cash basis/calendar year taxpayer, if there was payment from business assets (may be stating the obvious here) DURING the previous year, say 2016, this is not deductible for 2018 or 2018.

...

The deduction must be taken in the year the cash was actually expended, and again, must be tied to a true business obligation.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
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Customer reply replied 4 months ago
Pathetic answer....
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
  • Told you how to deduct (scheduled C as the entity no longer exists, therefor you are sole [proprietor by default) - trying to deduct this on Schedule A will NOT support that this is a business expense

 

  • Gave you what's important to document upon any audit (which is what we're talking about here), that this is a business obligation (or as IRS would say an obligation tied to an activity that is in pursuit of profit and not simply a personal activity, such as a hobby)

 

  • Made sure you understood that the business expenses should be be taken in the tax year that the money is expended.

 

  • And even gave you the tax policy/logic that any Revenue Officer would use in an audit - that this is an expense of the business, and not yours becasue you no longer own that business - some documentation that this was understood as part of the sale (ideally in the contract) would also support that this is a business expense.

 

  • Finally - showed you a situation where other accountants did this, how, and their logic for doing so

 

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

If you were looking for some sort of guarantee that this would fly on its surface, I won't do it. To do so would be irresponsible and not help you to understand what's important in this situation - that you must document how this can be a business expense when there is no longer a business.

...

And to say that this is PERSONALLY deductible would be misguided and dangerous for you.

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