Members zeberifo Posted February 21, 2003 Members Share Posted February 21, 2003 As requested: Regarding depreciation: IRS Chief Counsel Advice 199952010 (September 29, 1999) Depreciation; General rule for methods of accounting (Permissible v. not permissible). In re: Request for Change in Accounting Method .........The taxpayer's present method is to not capitalize and depreciate such assets valued at $1,000 or less. The taxpayer requests permission to change its method of accounting by increasing the minimum from $1,000 to $2,000. The request to change from a minimum capitalization limit of $1,000 to $2,000 is denied. The taxpayer's current method of not capitalizing assets valued at a certain amount or less is not an acceptable method of accounting. All property used in a trade or business (except land or inventory) that has a useful life of more than one year must be capitalized and depreciated. Taxpayers are not permitted to treat such items as current expenses simply because the particular item has a certain minimum value or less. We are sending a copy of this letter to the District Director, ***** District. If you have any additional questions, please contact at *****. Sincerely yours, Charles B. Ramsey, Chief, Branch 6, Office of Assistant Chief Counsel (Passthroughs and Special Industries).____________________________ Again this is a pure interpretation (on the IRS' part) of the law.What you and your accountant do is up to you. You should be aware though that if the IRS wants to screw - you they can.But would they bother......? Link to comment Share on other sites More sharing options...
Members zeberifo Posted February 21, 2003 Members Share Posted February 21, 2003 Regarding clothing: __________________ Musician could deduct expenses for the purchase and maintenance of dress clothes used exclusively in his business. W.J. Fisher, 23 TC 218, Dec. 20,648 (Acq.). Aff'd on another issue, CA-7, 56-1 USTC ¶9258, 230 F2d 230. Despite a musician's contention that she incurred expenses for clothing and shoes worn for performances, she could not claim a business expense deduction for amounts spent on garments that were suitable for general or personal wear. However, she was entitled to deduct the costs of certain items that were quite formal and not adaptable for general and personal wear. K.V. Popov, CA-9, 2001-1 USTC ¶50,353. __________________ These must be some really goofy glasses if you deducted them (the kind you wouldn't wear in public?). Then again they probably cost $5? Link to comment Share on other sites More sharing options...
Members BryanMichael Posted February 21, 2003 Members Share Posted February 21, 2003 What are these? transcriptions from an audit? Are these part of the code...or just an interpretation during an audit? Link to comment Share on other sites More sharing options...
Members zeberifo Posted February 21, 2003 Members Share Posted February 21, 2003 I copied these choice selections from our web-based tax research program. The sources are pretty clear from each respective post. The Internal revenue code sections are usually pretty bland.The discussion gets real good when you throw in regulations, procedures, court cases, etc. which debate the Code. It's been fun! Link to comment Share on other sites More sharing options...
Members BryanMichael Posted February 21, 2003 Members Share Posted February 21, 2003 I'll let you know what he thinks of this stuff-Peace,B Link to comment Share on other sites More sharing options...
Members seamless Posted March 15, 2003 Author Members Share Posted March 15, 2003 Hi there, Based on everything y'all have said, I *think* I'm going to go the sole proprietorship route and for the time being lump all my musical expenses in together (call myself something like Seamless Entertainment Productions). I have a home studio, a band and a DJ business (DJing being what I'm primarily making money off of right now, although hopefully my performance music and home studio will eventually show profit ... at some point). If this sets off any alarm bells to any of you, please let me know ... (although I will of course ask my tax preparer next year when I see him). Question about depreciation: if there is an item (like an amp) that I bought in 2002 (before I started to make money and go the sole proprietorship route), does it NEED to be on my taxes for 2002, or can I depreciate it on my 2003 taxes instead? If anyone knows any good web resources for this sort of thing, please let me know ... I've been hopping between the IRS site (which seems to assume I know a lot more than I really do) and the SBA site (which seems to assume I know absolutely nothing), and I haven't found any helpful sites yet on "depreciation for dummies," common and acceptable deductions, etc. Thanks! SL Link to comment Share on other sites More sharing options...
Members BryanMichael Posted March 15, 2003 Members Share Posted March 15, 2003 I'm glad this popped back up!I showed my tax guy the info that zeberifo posted and he agreed that while the info is CORRECT it is not THE WHOLE STORY. One CAN take a full deduction for a piece of gear in a given year but it is called an accelerated depreciation and a schedule must be kept for it. This amounts to a full dediction in practice for that year, which is what Loves LP's was talking about and what I was referring to. This is a choice you can make. There ARE certain things that CANNOT be taken at accelerated depreciation however. AS far as clothing- It's legitimate, so I deduct it. Of course IF the IRS wants to make a federal case out of 9.00 sunglasses or a 15.00 shirt, they CAN and they may win-but it was a legit expense and we took it. As far as meals and everything were concerned they are FULLY legit expenses, but you are limited to a 50% deduction regarding meals and entertainment. Seamless-As far as I know, YOU CANNOT deduct things that were NOT purchased during the year that you are filing taxes for-so...NO. BUT I encourage you to consult a tax professional and not rely on ME or ANYONE posting on the forum to give you the full 100% story on what you can or cannot do.B Link to comment Share on other sites More sharing options...
Members mj3 Posted March 16, 2003 Members Share Posted March 16, 2003 Some advice that was given to me by my accountant years ago: do not deduct expenses for equipment that the IRS may be able to come back and claim for back taxes owed on a business. Equipment is tangible--publishing rights and recordings (other than actual CDs, cassettes, etc...) are part of your livelihood and are pretty much useless to an enterprise that would be selling off your possessions at an auction. Link to comment Share on other sites More sharing options...
Members guitarbth Posted March 27, 2003 Members Share Posted March 27, 2003 Im in Accounting I right now in college and Im trying to figure out why one would want to put down a piece of gear as an expense. What is the benefit from doing this.....having made revenues or taken a loss....how does the expense benefit you? Excuse my ignorance. Thanks Link to comment Share on other sites More sharing options...
Members zeberifo Posted March 27, 2003 Members Share Posted March 27, 2003 In a nutshell, anyone running a business wants to know if they are doing it succesfully (according to Generally Accepted Accounting Principles). Hence the tedious effort to determine revenues and expenses. Additionally, this profit or loss will determine if you owe tax or not. Good luck with the classes! Link to comment Share on other sites More sharing options...
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