Question

Purchase of a small business

Forum|Forum|1 year ago
July 26, 2024
3 replies
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I started a new business by purchasing a business in May 2023 for 208,000. Where do I deduct the expense of the new business. I assumed to expense was a startup cost. But after reading posts I am not sure anymore. Can I expense the first 5000 and amortize the remainder or do I need to amortize the entire 208K? What does the statement that "the amount over 50,000 reduces the amount I can expense or amortize" mean? Thanks

TurboTax Home & Biz Windows

M-MTax

Did you immediately begin operations after you bought the business?

M-MTax

If you bought a business then you bought assets....either tangible or intangible or both. Buyers and sellers usually need to file form 8594

M-MTax

If the business is still a going concern then you will recover your purchase price through depreciation deductions or amortization for intangibles.

O

Opus 17

Employee

In general, startup costs must be amortized over 15 years. There is a special provision if costs are less than $50,000, that allows some of the costs to be taken as an immediate expense, but that does not seem to apply here.

I think @Anonymous_ or @AmeliesUncle might have more insight into whether there are other important tax differences between buying a business versus starting a new business.

A

AmeliesUncle

As was noted above, it depends on EXACTLY what you bought, what those items are used for, and the way the business is taxed.

This is really something that you should sit down with a good tax professional for. You are doing yourself (and your business) a disservice by trying to do it yourself and very often doing it yourself ends up costing you more money.