Purchase of a small business

[dmaloche]

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

[M-MTax]

Did you immediately begin operations after you bought the business?

[Opus 17]

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

[dmaloche]

I closed on the business sale on a Wednesday, May 17, 2023, and started operations on the following Monday, May 22, 2023. 

[M-MTax]

Were any tangible assets included in the purchase price? Was a form 8594 filed?

[M-MTax]

I assume you're a sole proprietor so you would be filing a Sch C with your 1040.

You would list the assets you purchased on your return and depreciate or amortize depending on the type of asset.

[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.