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Subject Author Date
Single Event Seth Breidbart 12-17-2006
| `--> Re: Single Event Seth Breidbart12-18-2006
---> Re: Single Event Harlan Lunsford12-17-2006
Posted by Seth Breidbart on December 17, 2006, 6:40 pm
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 A cash-basis taxpayer decides to run an event. It will take
place in 2009. He sells tickets early, starting in 2007.
Essentially all the expenses will be in 2009, but most of
the income will be in 2008.

How does he avoid having to pay income tax in 2008 on
phantom income? Or is all he can do reclaim it in 2009 when
the expenses hit?

Seth

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Posted by Mark Bole on December 17, 2006, 10:05 pm
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 Seth Breidbart wrote:

> A cash-basis taxpayer decides to run an event. It will take
> place in 2009. He sells tickets early, starting in 2007.
> Essentially all the expenses will be in 2009, but most of
> the income will be in 2008.
>
> How does he avoid having to pay income tax in 2008 on
> phantom income? Or is all he can do reclaim it in 2009 when
> the expenses hit?

My first thought is: income in 2008 (nothing "phantom" about
it), and then a NOL carry-back in 2009.

However, your scenario raises a few questions, many of which
depend on the nature of the "event".

Is this taxpayer starting a business as a sole proprietor,
which will exist for at least three years? Will there be
any inventory? Will the customers be treating their ticket
purchases as legitimate business expenses on their part, or
personal expenses? Is there sales tax on the ticket
purchases?

The scope of my imagination does not currently include a
realistic situation where I would fork over cash now to a
private individual in exchange for the promise of attending
(or participating in, or reselling my ticket to) some event
two years hence. (Heck, even the Olympics don't sell tickets
to the public that far in advance, and they have a long
history...) Wouldn't this normally be something a non-profit
organization would handle? Or, wouldn't this normally be
something that customers would make a nominal deposit for,
rather than a full-price purchase, so far in advance?

-Mark Bole

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Seth Breidbart on December 18, 2006, 8:43 pm
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>> A cash-basis taxpayer decides to run an event. It will take
>> place in 2009. He sells tickets early, starting in 2007.
>> Essentially all the expenses will be in 2009, but most of
>> the income will be in 2008.
>>
>> How does he avoid having to pay income tax in 2008 on
>> phantom income? Or is all he can do reclaim it in 2009 when
>> the expenses hit?

> My first thought is: income in 2008 (nothing "phantom" about
> it), and then a NOL carry-back in 2009.
>
> However, your scenario raises a few questions, many of which
> depend on the nature of the "event".
>
> Is this taxpayer starting a business as a sole proprietor,
> which will exist for at least three years?

Yes.

> Will there be any inventory?

Some, not much (stuff produced to be provided to all
members).

> Will the customers be treating their ticket
> purchases as legitimate business expenses on their part, or
> personal expenses?

Probably half and half

> Is there sales tax on the ticket purchases?

No (they're really memberships in a convention).

> The scope of my imagination does not currently include a
> realistic situation where I would fork over cash now to a
> private individual in exchange for the promise of attending
> (or participating in, or reselling my ticket to) some event
> two years hence.

Others do.

> Wouldn't this normally be something a non-profit
> organization would handle?

Usually, yes; most of these are run by non-profits, and are
annual events. But a few are run by nonexempt entities.

> Or, wouldn't this normally be
> something that customers would make a nominal deposit for,
> rather than a full-price purchase, so far in advance?

Nope.

Seth

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Harlan Lunsford on December 17, 2006, 10:05 pm
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Seth Breidbart wrote:

> A cash-basis taxpayer decides to run an event. It will take
> place in 2009. He sells tickets early, starting in 2007.
> Essentially all the expenses will be in 2009, but most of
> the income will be in 2008.
>
> How does he avoid having to pay income tax in 2008 on
> phantom income? Or is all he can do reclaim it in 2009 when
> the expenses hit?

From am purely accounting standpoint, these seem to be
deposits, refundable if not earned when the event occurs.
This is what's called the matching principal, i.e. matching
income and expense.

I've not researched it, but am inclined to follow the old
dictum that income tax law closely follows income tax law.

What say others?

Holiday ChEAr$,
Harlan

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Stuart A. Bronstein on December 18, 2006, 8:43 pm
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> Seth Breidbart wrote:

>> A cash-basis taxpayer decides to run an event. It will take
>> place in 2009. He sells tickets early, starting in 2007.
>> Essentially all the expenses will be in 2009, but most of
>> the income will be in 2008.
>>
>> How does he avoid having to pay income tax in 2008 on
>> phantom income? Or is all he can do reclaim it in 2009 when
>> the expenses hit?

> From am purely accounting standpoint, these seem to be
> deposits, refundable if not earned when the event occurs.
> This is what's called the matching principal, i.e. matching
> income and expense.
>
> I've not researched it, but am inclined to follow the old
> dictum that income tax law closely follows income tax law.

I agree. It reminds me of the case where a guy embezzled
several million dollars around Thanksgiving, and was caught
the following January. The bulk of the money was recovered.

While he was sitting in jail the embezzler got an assessment
notice from the IRS for tax on his stolen millions. When he
complained that he didn't get to keep the money, he was told
that he'd be allowed the deduction for the following year.

Stu

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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