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Bureau Of Vocational Rehabilitation

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Question:
A new client, who will come in next week, has started a business with the help of the Bureau of Vocational Rehabilitation. This help included buying equipment for her. The procedure was to give her the money, tell her to buy it, get it into BVR's name somehow, lease it to her (though she in fact never paid any rent for it), and then give it back to her when she completed their program. Since all this happened in 1998, she wondered what the tax implications were.

It sounds to me as if the equipment is simply a gift from the government, not taxable income. She has no basis in it, so she can't take depreciation on it, or 179 it. If she ever sells it, with no basis, all the proceeds are taxable income. (Or is her basis the donor-government's basis?)

How does this sound to other tax pros? Has anybody had clients who'd received BVR help? Does the procedure my client described (as best I understood it) sound typical? Are there questions I need to ask, form numbers that the client and I should expect to see from BVR, any other issues that ex-BVR clients as entrepreneurs need to discuss with their tax preparers?


Answer:
It looks to me like a loan, followed by a gift, neither of which have any tax implications for your client. Of course she will need to file the appropriate business form.





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