kamlet[at]panix.com (Arthur Kamlet) wrote:

- quote -

Aside from the fact that The Limited primarily sells
clothing, which is seldom allowed as a business expense, the
question comes down to whom you have your contract with.

That is to say, if the loan agreement is with The Limited
itself, you are not paying them when you use their charge
card. If it's with a separate corporation, you are paying
it when you use the card.

Whom they might assign the debt to after it's incurred
should be irrelevant, at least from a technical legal
standpoint.

Stu

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Harlan Lunsford <hlunsfordns[at]bellsouth.net> wrote:
- quote -

How can I, a mere customer, be expected to know what
arangements Bob happens to have with any 3rd party
collectors/financers/lenders?

Actual local example: Here in Columbus, the Limited
Corporation (now named Limited Brands LTD) once had its own
Limited Creidt Card. They had a dividsion that handled the
cards, all owned by the limited.

Some years ago they incorporated that division, still wholly
owned, into "Alliance Data Systems" in anticipation of
spinning it off.

Not long after, it spun off about 15% of Alliance, and
retained 85% - think consolidated tax returns.

And after a number of months or perhaps a year or so, it
spun off the rest of its holdings in Alliance.

As a mere customer of LTD, would I be expected to track my
payments on each of these intervals, 100% owned by LTD, 85%
owned by LTD and 0% owned by LTD?

I hope the answer is no?

But if I am, and if I write to LTD to ask them for
information on their ownership and billing and other
contractual arrangements with Alliance that might affect me,
and they ignore me or answer that it's none of my business,
other than not keeping my credit arrangement with them, do I
have any recourse?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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A.G. Kalman wrote:
- quote -

Now you've got it. No third party involved with what we
call "store cards", e.g. Macy's, Rich's, Belk's, you name
it. They, like Bob, finance their own receivables. It's
just not apparent maybe because the cards are being
processed by someone like Total Systems in Columbus, GA.

If I use my Visa whereever, I've borrowed the funds, as you
put it, and merit the tax dedution, cash or accrual. But
should I charge the amount on an account at Bob's (actually
Malone's down here), no deduction for this cash method
taxpayer until January when I pay him.

Christmas Cheer$,
Harlan Lunsford, EA n LA

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"L K Williams" <lanny[at]loxinfo.co.th> wrote:

- quote -

It's one of those silly points that shouldn't make a
difference but does to bureaucrats who insist on blindly
following rules whether they make sense in a particular
instance or not.

From a legal standpoint it would likely depend on the
initial credit application, and who the parties are. If in
that document it's clear that the money is being borrowed
from a third party, you're certainly right. But if the
store is the nominal creditor, the fact that they've
assigned their rights to collection to a third party
shouldn't have any effect on whether the *buyer* has
actually made a payment or not.

Stu

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"A.G. Kalman" <agk202[at]netscape.net> wrote:
- quote -

As a cash basis taxpayer you don't get a deduction until a
payment is actually made. Buying something on credit does
not qualify.

Now if you borrow money from A and pay the bill to B, the
payment was actually made, so you get the deduction
immediately.

- quote -

I don't understand the difference between Bob's and Macys.

Stu

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L K Williams <lanny[at]loxinfo.co.th> wrote:

- quote -

My understanding is that if you have borrowed money from a
third party (such as a bank credit card issuer), you get the
deduction when the funds are delivered to the vendor.
However, if you simply borrow from the vendor (such as a
department store credit card), you DON'T get the deduction
until the vendor is paid. (Don't ask me how that latter rule
might have applied back in the days when Sears owned the
Discover Card and/or the "bank" that supposedly issued it.
<g> ) In either case there has to be ~actual payment~ to the
vendor in order for a cash basis taxpayer to claim the
deduction.

As to the accounting for the cash flow, see my recent rants
related (loosely) to frequent flyer miles. The operable
concept is: "He who commingles bears the consequences of his
actions." So, if it is ~really important~ that you get a
deduction for a particular item, don't let yourself be
caught in a position where it might be arguable as to
whether you have actually (yet) paid for the item.

MTW

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Stuart O. Bronstein wrote:
- quote -

Maybe I'm struggling with the use of the term "store card."
I see no difference in the accounting for the use of a Visa
card or a Macy's card to buy an item at Macy's at the end of
December that is a deductible business expense. I don't see
how the use of the Macy's card affects my ability to expense
the item as a cash basis taxpayer. In both instances I have
borrowed funds to make the purchase. In both cases, the
store gets paid as soon as the electronic payment flows
through the system. In both cases I created a liability. In
both cases I don't pay the bill until the following year.
In both cases a third party handled the financing.

On the other hand, I do see a difference if I have a card
from Bob's Office Supply and Bob is the funding agent. In
other words, there is no third party. In this instance I
can understand why my payment would be considered to have
been made in the following year and not be deductible until
the following year.

--

Alan
http://taxtopics.net

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"Joel Berry, CPA" <joelDELETE[at]sugarlandcpas.com> wrote:
- quote -

I don't think the reasoning is correct. Many stores and
chains offer private credit cards that can only be used at
their stores. But, many of these are actually issued by a
bank or other credit card company. For example if you buy
something from CompUSA on their card, you are actually
liable to a bank (I forget which one) and not to CompUSA.
So, the store does get paid immediately. They may have a
contingent liability if you default on your payment(s) but
the underwriting bank does give them credit at the time of
the purchase.

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"A.G. Kalman" <agk202[at]netscape.net> wrote:
- quote -

There are Revenue Rulings dealing with medical expenses
(Rev. Rul. 78-39, 1978-1 CB 73, IRC Sec(s). 213) and
charitable contributions (Rev. Rul. 78-38, 1978-1 CB 67 --
IRC Sec. 170) that specify that these expenses are
deductible when charged to a bank credit card. The Rev.
Ruls. refer only to bank credit cards.

I can't provide cites other than these, but I have heard CPE
instructors make the same statement regarding bank vs. store
credit cards. That, of course, doesn't mean that the
distinction is correct.

Joel Berry, CPA
Sugar Land, Texas

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"A.G. Kalman" <agk202[at]netscape.net> wrote:
- quote -

I didn't go look up a cite, but it makes sense to me. In
one case the store is getting paid nearly immediately. So
in effect you are borrowing money and paying it now.

With a store card, though, nobody gets paid until later.

Stu

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- quote -

a cite? would you settle for a concurring opinion?
Anyway, it's an IRS reg as I recall.

Christmas Cheer$,
Harlan Lunsford, EA n LA

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"Leggs" <phillyleggs[at]excite.com> wrote:

- quote -

I don't agree. I have always understood the rule to be that
credit card charges are deductible when posted to your
account. To require deduction when paid presents most
credit card holders with an accounting problem. Since so
many people carry a balance on their card accounts, what
item is being paid when a partial payment is made? Do we
have to keep detailed records and use FIFO? Do we use a
proportional allocation? If so, do we have to recalculate
every month?

I think the IRS wisely decided to dodge this problem by
saying the item is considered paid when posted. After all,
how does the charge differ from going to the bank for a loan
and then taking the cash to the seller?

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If you are on the cash basis, you record the expense when
the cash goes out (when u pay in 04) If you were on the
accrual method, you could have taken the expense when it was
incurred (03).

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Dick Adams wrote:
- quote -

I need a citation for your "store credit cards" opinion. I
see no difference. In one case it is the bank or company who
issued the credit card that lends you the money for the
expense and in the other case it is the store or the store's
bank that lends you the money for the expense. What's the
difference such that in the latter, the expense is deferred
until paid?

--

Alan
http://taxtopics.net

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Viet Huynh wrote:

- quote -

My recollection is the "posting" date on your credit card
statement determines the date for a cash accounting taxpayer.

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"Viet Huynh" <huynh0511[at]yahoo.com> wrote

- quote -

You can claim it as being paid (by the charge card) in December.

- quote -

The legal answer is this, it's a 2003 expense. In reality,
most people probably would take the expense in 2004 when the
check was written. And in all reality, unless the amount
(and/or the item) is significant, the IRS wouldn't care all
that much. And by significant, I mean when was an asset
purchased and placed in service for taking Section 179, etc.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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- quote -

When you put it on your credit card, you are deemed to have
paid it.

Helen, EA in PA
Member of The Tax Gang
President, PA Society of Enrolled Agents
Campaigning for NAEA Board of Directors - Looking for YOUR vote

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huynh0511[at]yahoo.com (Viet Huynh) wrote:

- quote -

Under cash accounting, expenses are considered paid when the
item is CHARGED to the credit card. When the cc bill is paid
is immaterial.

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huynh0511[at]yahoo.com (Viet Huynh) writes:

- quote -

It depends on the type of credit card used.
Personal credit cards (Visa, MC, AmEx, Discover, etc.) are
expensed when charged.
Store credit cards (usable only at that store) are expensed
when the bill is paid.

Dick

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huynh0511[at]yahoo.com (Viet Huynh) writes:

- quote -

The expense was paid in 2003 when it was posted to your
credit card account.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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