amortize loss on pre-incorporation expenses?

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amortize loss on pre-incorporation expenses?

Mark Hedges
Hi, so, thanks for an amazing accounting program.  I'm still learning
how to use it.

Over the past few years, I personally paid artists to produce comic book art.

I created an S-corporation to finish the work and publish.

An accountant recommended that I transfer the intellectual property,
tangible artwork, script copyrights etc. to the new corporation in
exchange for shares of stock equal to what I paid for it previously,
i.e. if I spent $5000, I will exchange for 5000 shares.

I will have very little personal or business income this year, so
claiming this as a loss on taxes this year will not be helpful.

The accountant said I can amortize the loss until future years and
claim it as an expense on a future year's tax return.

How do I account this in GnuCash?

Thanks.
Mark
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Mark Hedges
CEO Weird Vibe Inc.
+1-310-487-7123
https://weirdvibe.media
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Re: amortize loss on pre-incorporation expenses?

Mark Hedges
On Mon, Aug 21, 2017 at 5:18 PM, Mark Hedges <[hidden email]> wrote:

> Hi, so, thanks for an amazing accounting program.  I'm still learning
> how to use it.
>
> Over the past few years, I personally paid artists to produce comic book art.
>
> I created an S-corporation to finish the work and publish.
>
> An accountant recommended that I transfer the intellectual property,
> tangible artwork, script copyrights etc. to the new corporation in
> exchange for shares of stock equal to what I paid for it previously,
> i.e. if I spent $5000, I will exchange for 5000 shares.
>
> I will have very little personal or business income this year, so
> claiming this as a loss on taxes this year will not be helpful.
>
> The accountant said I can amortize the loss until future years and
> claim it as an expense on a future year's tax return.
>
> How do I account this in GnuCash?

Maybe in this case, I would have $5000 as an Equity > Capital Assets
or Equity > Project Asset, and then a $5000 Expense for the "value" of
the exchange of stock on the bill of sale for the stock-for-asset
exchange?

Or would it just go under Assets, in a special account for
intellectual property assets?

Of course I know it's not worth anything "real" until I sell issues,
derivations, etc., but the point is how to account and write off the
prior expense properly.

Thank you.

Mark

--
Mark Hedges
CEO Weird Vibe Inc.
+1-310-487-7123
https://weirdvibe.media
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Re: amortize loss on pre-incorporation expenses?

Mike or Penny Novack-3
In reply to this post by Mark Hedges
On 8/21/2017 8:18 PM, Mark Hedges wrote:

> Hi, so, thanks for an amazing accounting program.  I'm still learning
> how to use it.
>
> ........
> I will have very little personal or business income this year, so
> claiming this as a loss on taxes this year will not be helpful.
>
> The accountant said I can amortize the loss until future years and
> claim it as an expense on a future year's tax return.
>
> How do I account this in GnuCash?
>
> Thanks.
> Mark
I will give the same answer to this as I give to similar questions. Your
real problem is NOT about how to account for this using gnucash but in
not knowing how to account for this in ANY method of doing double entry
bookkeeping. In other words, if you knew what transactions you would be
entering were you keeping your books the old fashioned way, pen and ink
on paper, you would probably see how to enter those transactions using
gnucash.  Gnucash partially automates the process, keep the books in
balance (avoids transcription errors),and produces report, but it can't
tell you what transactions you should be entering.

Either have your accountant show/tell you, or get a text "accounting for
the S corporation" and look up amortized losses. I'm not doing
accounting for any for profit corporations and so would have to look it
up myself. And even if I knew off the top of my hat, am not qualified to
give that sort of advice. Knowledge of tax law with regard to S
corporations is necessary to know how, and to what extent, you can defer
passing through gains and losses << S corporations are taxed more like
partnerships are taxed than how regular corporations are taxed >>

Michael D Novack



Michael D Novack
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Re: amortize loss on pre-incorporation expenses?

Mark Hedges
On Tue, Aug 22, 2017 at 5:06 AM, Mike or Penny Novack
<[hidden email]> wrote:

>
>> ...
>> The accountant said I can amortize the loss until future years and
>> claim it as an expense on a future year's tax return.
>>
>> How do I account this in GnuCash?
>
> I will give the same answer to this as I give to similar questions. Your real problem is NOT about how to account for this using gnucash but in not knowing how to account for this in ANY method of doing double entry bookkeeping. In other words, if you knew what transactions you would be entering were you keeping your books the old fashioned way, pen and ink on paper, you would probably see how to enter those transactions using gnucash.  Gnucash partially automates the process, keep the books in balance (avoids transcription errors),and produces report, but it can't tell you what transactions you should be entering.
>
> Either have your accountant show/tell you, or get a text "accounting for the S corporation" and look up amortized losses. I'm not doing accounting for any for profit corporations and so would have to look it up myself. And even if I knew off the top of my hat, am not qualified to give that sort of advice. Knowledge of tax law with regard to S corporations is necessary to know how, and to what extent, you can defer passing through gains and losses << S corporations are taxed more like partnerships are taxed than how regular corporations are taxed >>
>
> Michael D Novack

Of course, you are right.  I will consult a CPA.  Thanks.

Mark
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