Level 3

Sale of Fishing License

Forum|Forum|6 years ago
July 2, 2020
2 replies
21 views

I have a client who purchased a fishing license back in 1991. Back then licenses were significantly lower so it was expensed; not amortized. . Client sold his fishing license for significant amount since they are limited . Is the sale considered all capital gain or all ordinary income?

This topic has been closed for replies.

sjrcpa

Level 15

It was used in a business?

The more I know the more I don’t know.

J

j-kanabisAuthor

Level 3

Yes in a business. Additional information from client is that the cost of his Federal License was next to nothing and the cost of his State Fishing License was a yearly renewal of $ 525.- since 1985 (every year it was expensed if that can be added to provide some cost basis so the sale may be shown as some ordinary gain and some capital gain).s

sjrcpa

Level 15

His basis is zero since all costs were expensed. I don't know if this is a capital asset.

The more I know the more I don’t know.

J

j-kanabisAuthor

Level 3

Updating information on Fishing License and any tips appreciated:

So Client acquired Federal Fishing License when acquiring the boat (commercial fishing) in 1992. An amount for the Federal License was not separated at time of purchase. Was told by Client it was next to nothing. Client has since sold boat with no tax basis (cost - acc dep), but still has licenses.

Now from that period going forward fishing licenses have been limited and as such the price for them has significantly increased. Licenses are now allowed to be amortized over 15 years.

So how would you handle if your client sold his Federal Fishing License for $75,000 and one of his State Licenses for another $ 30,000? The buyer will amortize over 15 years ; correct? And then when he resells it , presumably for a gain, he will have both ordinary or recapture gain and capital gain.

Do you think it is far fetched to use a cost basis on the State license $ 14,000 (28 years @ $ 500 per year actual payment) so that the sale shows both capital gain and ordinary? What other thoughts if it were your client?

sjrcpa

Level 15

Yes I do think that is far fetched. Your client already deducted all costs associated with acquiring and renewing the license and did not treat it as a capitalized cost.

The more I know the more I don’t know.

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