K-1 and deductible software development costs

ManhattanTrader · Aug 3, 2003

Hello,

does anyone know whether costs incurred for proprietary software development can be deducted from K-1 income? the programmer I will use has a legit software development/consulting company and everything.

thanks

Foz · Aug 3, 2003

Are you a schedule C Trader? Is it a business expense? Then sure.

ManhattanTrader · Aug 3, 2003

Hi,

I'm not sure what you mean by Schedule C. I'm a proprietary trader(LLC member) and they'll issue me a K-1 next year. yes, it's definetely a business expense

tnx

mgkrebs · Aug 3, 2003

You could have your firm pay the guy out of your sub account and list the expense on the k1.

ManhattanTrader · Aug 3, 2003

that makes sense. thanks for the tip

Foz · Aug 3, 2003

If you don't file a Sch. C, are you thinking of deducting it on your Sch. A? It will only be deductible to the extent it exceeds 2% of your AGI.

Foz · Aug 3, 2003

Quote from GreenTraderTax:

Proprietary traders receiving a Form K-1 as a LLC member may deduct their "unreimbursed business expenses" on Schedule E, underneath where they report their K-1 ordinary income or loss.

Nice!

ManhattanTrader · Dec 8, 2003

Quote from GreenTraderTax:

Proprietary traders receiving a Form K-1 as a LLC member may deduct their "unreimbursed business expenses" on Schedule E, underneath where they report their K-1 ordinary income or loss.

Robert Green, CPA

thanks for the info. would there be a a maximum amount of software development expenses that can be deducted in a certain year? some percentage of taxable income?

thanks in advance

egusc · Dec 8, 2003

Quote from ManhattanTrader:

thanks for the info. would there be a a maximum amount of software development expenses that can be deducted in a certain year? some percentage of taxable income?

thanks in advance

There is no maximum rule. However, the general rule for expenses is that it must be an ordinary and nessacary business expense. So the dollar amount of the expense must bear some relationship to the possible income that a typical business would expect.

ManhattanTrader · Dec 8, 2003

Quote from egusc:

There is no maximum rule. However, the general rule for expenses is that it must be an ordinary and nessacary business expense. So the dollar amount of the expense must bear some relationship to the possible income that a typical business would expect.

egusc,

thanks for the info