Discussion:Business Loss
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Discussion Forum Index --> Tax Questions --> Business Loss
| 10 March 2007 | |
| Hello,
I sold my coffee business 2 years ago but I was made to be a guarantor on the leasehold. A year later, my buyer defaulted on the lease and I was pulled back. I made a negotiation to the landlord that I'd pay him a lum sum amount of $18K in 4 years to get out. Can I claim that amount in my tax return? I was told by my tax preparer that I can't since I'd need to have the other party's SS to file this as business loss, and the problem is I don't have it. Can I still claim it? Thanks, Stanley | |
| 10 March 2007 | |
| This is a valid deduction. Your preparer is being extra cautious. | |
| 10 March 2007 | |
| Thanks very much for the response. Would I include this in 4794 form?
Regards -s | |
Mtmckeecpa (talk|edits) said: | 10 March 2007 |
| Lang,
Sch C. | |
| 11 March 2007 | |
| thank you guys. I know where to go to next time for tax advice :) | |
| 11 March 2007 | |
| Hey MTM, would your answer be different if he had operated his coffee business as a C or S corp???? | |
| 11 March 2007 | |
| One thing I am still confused is that when I checked last year file, my tax preparer put it in 4797 form. I guess he did it wrong? BTW, I use a guy this year since my previous tax preparer moved out of the area | |
| 11 March 2007 | |
| Lang, how was your Coffee Shop taxed? As a Schedule C Sole Proprietorship? Or as a corporation? | |
Mtmckeecpa (talk|edits) said: | 12 March 2007 |
| I assumed Sch C was originally filed...otherwise I'd put it on Sch D for a C or an S. | |
| 12 March 2007 | |
| Hi Kevin,
the coffee shop was taxed as sole proprietorship. Under what scenario would you file under 4797? I was afraid that if I do it differently this year, it might trigger an audit or something. Thanks Stanley | |
| March 12, 2007 | |
| If you reported the sale on the installment basis, Form 4797 would have been included, along with Form 6252. Not sure if this helps explain why the 4797 was included in your return. | |
| 12 March 2007 | |
| Hi Deback,
Regards, -s | |
| 13 March 2007 | |
| Since the two of professional tax preparers I used do not seem to be that professional after all, I have decided to do it on my own. BTW, no offense to any of professionals here, esp you guys/gals have been a fantastic source of information. I bought the Turbo Tax software and claim this landlord repayment as expense on schedule C. However, when being asked by "Turbo" wizard whether I'm materially participated in the business, what should I choose?
1) I think it should be NO since I'm no longer participating in the business at all since there's no longer a business. However, then the expense claim does not seem to make any difference to the refund 2) If I say YES, then it does take the 4K expense that I punch in, but is that the right answer? Thanks in advance, Stanley | |
| 16 March 2007 | |
| Hi guys,
OK, so I put the repayment on Schedule C. I used the Professional Tax Review feature in Turbo Tax to have my file reviewed by TaxAudit. The report I got back told me I should report it on Schedule D instead as nonbusiness bad debt: "Based on the information provided, the payment obligation must be reported on Schedule D as nonbusiness bad debt instead of Schedule C "Profit or Loss From Business" because you actually did not run the business anymore." Now I come to the point of total confusion since I don't know what to do any more. This, however, does not make sense to me at all since by Turbo Tax definition, a nonbusiness bad debt is "a loan (not a gift) I made to someone and I can't collect it". I'm the debtor here. Schedule C also does not make completely sense to me since I am no longer to run the business. Can someone give me a reasonable advise please please pretty please? Thanks -S | |
Mtmckeecpa (talk|edits) said: | 16 March 2007 |
| Lang,
See Revenue Ruling 67-12 (Dowd) as a basis to deduct these expenses on Sch C. BTW, and as a side note, turbotax for the 2005 season also stated that self employed could deduct the m'care premium as self employed health insurance deduction. Some would disagree with that position, since the IRS issued FSA 3042 stating that self employed could not. | |
| 16 March 2007 | |
| Sometimes asking the box is not a smart thing to do. But you generally get what you pay for. | |
