ncCPAp on the GO!

SSTB or not ?

  • 1.  SSTB or not ?

    Platinum Most Valuable Member
    Posted 08-26-2019 05:47 AM
    Hello All

    i have a client who is a franchisor. The sell franchises. The ownership of a franchise gives the franchisee the right to operate under the trade name. of the group. the Group's principal product is insurance. the sale of Insurance is not usually considered a SSTB.  but what about the sale of a territorial right to operate.

    Would that be categorized as an SSTB ?


    Any comments appreciated.



    ------------------------------
    Abby Alhante
    KURCIAS & ALHANTE, CPAs LLC
    Melville NY
    ------------------------------


  • 2.  RE: SSTB or not ?

    Platinum Most Valuable Member
    Posted 08-26-2019 08:52 PM
    Not sure why the product or service the franchisee is selling would have anything to do with the sale of a franchise.

    ------------------------------
    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
    ------------------------------



  • 3.  RE: SSTB or not ?

    Posted 08-27-2019 08:30 AM
    Abby, be aware of this provision... Under a special de minimis rule, a business with $25 million or less in gross receipts isn't treated as an SSTB if less than 10% of its gross receipts come from personal services. The threshold is 5% for businesses with gross receipts above $25 million.
    So, if the franchisor (I cannot visualize a scenario where such could ever be an SSTB) is below this threshold, "no harm, no foul."


    ------------------------------
    Robert Gaines CPA
    ROBERT N. GAINES, CPA
    Temple TX
    ------------------------------