home business tax question

What is the name of your state? Maryland

Hello,
I payed out $3,500 to try a home-business which involved an upfront fee to become an "affiliate" to sell available information products over the internet on websites created for me. The licensing package included the website and the permission to sell the information products. I also had to open a merchant account to accept credit cards on the website, which was structure to be a lease (for 36 months) to own agreement. Unfortunately, it is a lot harder than originally thought, and I no longer pursue the business, even though I still have to make the lease payments every month for the merchant account.

First questions is that can I claim the $3,500 to start the business and, if so, how?

Second, since I no longer pursue the business, but still am binded contractually to make my lease payments for the merchant account, can I claim the full lease amount over the 36 months as my business expense. Thank you.

FIRST QUESTIONS IS THAT CAN I CLAIM THE $3,500 TO START THE BUSINESS AND, IF SO, HOW?
If you have completely abandoned the business so that the licenses, etc. have absolutely no value to you, then you can deduct as a loss from the disposition of business on Form 4797.


SECOND, SINCE I NO LONGER PURSUE THE BUSINESS, BUT STILL AM BINDED CONTRACTUALLY TO MAKE MY LEASE PAYMENTS FOR THE MERCHANT ACCOUNT, CAN I CLAIM THE FULL LEASE AMOUNT OVER THE 36 MONTHS AS MY BUSINESS EXPENSE. THANK YOU.
If you have abandoned the account and it has no value to you, then you can probably deduct the entire amount of the lease this year. The general rule is that the cost of a lease must be amortized over the life of the lease, but since there is no longer any economic use to you for the lease, you can probably deduct the entire cost now. If you do deduct it now and you fail to make all the payments, you would have income for the unmade payments.

thanks...loku

Loku,

Thank you so much for the answers. I'm using TurboTax for the Web (TurboTax Primier Home and Business) and am not quite sure where to enter the information for the 2 mentioned deductions in this thread.

Merchant Account Lease
I currently have it entered as a Depreciable Asset and have taken the entire calculated amount of the lease as a Section 179 Deduction with the following Asset Classification - "Rent to own property". Do I need to specify a Date of Sale or Disposition, since I no longer pursue the business? If so, what date can I specify?

Affiliate Licensing Package Fee
Do I also entered this line item as a Depreciable Asset and take the full amount as a Section 179 Deduction? What Asset Classification will this fee fall under? Is a Date of Sale or Dispostion also required and what date can I specify?

Sorry for all the question, just want to make sure I do it correctly since it is my first time with these kinds of business deductions. Thank you

loku....need help on response

Loku,

Thank you so much on your first reply. Any additional advice on my second post would be very helpful and will help me to finalize my 2002 return.