Of course you should talk to an accountant, but they should be a sales or marketing expense and fully deductable. Always keep good records.
Marty [ Edited by plumzany on Date 01/08/2004 ]
Quote:It definately can...it is like the expense of rehab.esuccess,
Rehab expenses are not deductions, they are capital improvement costs. Capital improvement costs are added to the cost basis and recovered through depreciation.
Everyone is right. It is a capital expense on keepers and should be added to the basis and if you are a rehab dealer it is an expense and should be added to the cost of buying and fixing and selling to get the net income or loss from that project. Deduct it one way or the other but be sure to put it somewhere to off set your income or to rise your basis.
Good LUCK and Thank You
Hope this helps some
Ted Jr
This is an interesting thread. DaveT, thank you for your usual insightfulness.
This brings up an interesting question for me since I paid for travel and lodging expenses for a bird dog to find a property. I will also be paying her for the specific property she found. I suspect that my accountant will allow the travel and lodging to be expensed, but the payment for the specific property may well be capitalized like many other acquisition costs.
Regards to all,
Ed
If you pay out $600 or more to an individual and/or sole proprietor independent contractor you must issue a 1099-Misc on or before January 31 of the following year.
If you use independents that work through a corporate entity you are not required to issue 1099's.
Of course you should talk to an accountant, but they should be a sales or marketing expense and fully deductable. Always keep good records.
Marty [ Edited by plumzany on Date 01/08/2004 ]
It definately can. If it was an expense in your obtaining the house it is like the expense of rehab.
I am going to disagree because I don't believe the answer you have received applies in all situations.
I look at the birddog fee you paid as an acquisition expense that (like your rehab expense) increases your cost basis in the property.
Take your question to your CPA, who, armed with full knowledge of your business strategy and investment practices, can make an informed determination.
Not only can it be counted but it should be counted as an expense.
Quote:It definately can...it is like the expense of rehab.esuccess,
Rehab expenses are not deductions, they are capital improvement costs. Capital improvement costs are added to the cost basis and recovered through depreciation.
Everyone is right. It is a capital expense on keepers and should be added to the basis and if you are a rehab dealer it is an expense and should be added to the cost of buying and fixing and selling to get the net income or loss from that project. Deduct it one way or the other but be sure to put it somewhere to off set your income or to rise your basis.
Good LUCK and Thank You
Hope this helps some
Ted Jr
This is an interesting thread. DaveT, thank you for your usual insightfulness.
This brings up an interesting question for me since I paid for travel and lodging expenses for a bird dog to find a property. I will also be paying her for the specific property she found. I suspect that my accountant will allow the travel and lodging to be expensed, but the payment for the specific property may well be capitalized like many other acquisition costs.
Regards to all,
Ed
What no one brought up, but your accountant may address, is the amount of the fee and your IRS reporting obligation.
I believe you are required to give each bird-dog a 1099 for birddog fees that you paid which total $600 or more to that individual during the year.
Good question to bring up if the accountant overlooks it.
In regard to the obligation to issue 1099's:
If you pay out $600 or more to an individual and/or sole proprietor independent contractor you must issue a 1099-Misc on or before January 31 of the following year.
If you use independents that work through a corporate entity you are not required to issue 1099's.
thank you for the tip on the 1099