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CPA: winery question
Posted on 3/21/13 at 4:51 pm
Posted on 3/21/13 at 4:51 pm
under GAAP can wine sales be capital gains?
you craft the product, hold it for a year or more, then you sell it to distributors.
Guy I knows family owns a winery and he said that they are taxed the same as income.(but he's not really actively involved in the business)
I told him that they should open a holding company.
1. create product
2. sell to holding company at cost
3. when holding company sells to distributors, the difference in price is capital gains
I am not a CPA and only took 2 accounting courses....just looking for an easy explanation as to why this can't be done if it can't be done.
you craft the product, hold it for a year or more, then you sell it to distributors.
Guy I knows family owns a winery and he said that they are taxed the same as income.(but he's not really actively involved in the business)
I told him that they should open a holding company.
1. create product
2. sell to holding company at cost
3. when holding company sells to distributors, the difference in price is capital gains
I am not a CPA and only took 2 accounting courses....just looking for an easy explanation as to why this can't be done if it can't be done.
This post was edited on 3/21/13 at 4:56 pm
1
Posted on 3/21/13 at 5:10 pm to Iona Fan Man
No, if you are a winery you manufacture wine and sell your inventory as ordinary income from your trade or business. As for your idea to become an investor in wine so you can buy and sell for capital gains, I doubt the IRS would go for it. First, they would treat the wine as personal assets instead of investment assets. As such you would have to pay taxes on all capital gains you realize from buying and selling wine, but you wouldn't be able to deduct any losses since losses from the sale or exchange of personal assets are not deductible. So investing in wine for as a money making venture has a higher tax cost than investing in real estate.
In your scheme how is the intermediate entity not a wholesaler? Wholesalers do not get to sell for capital gains.
In your scheme how is the intermediate entity not a wholesaler? Wholesalers do not get to sell for capital gains.
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