I purchased a franchise agreement in 2007, never opened the franchise and signed a mutual termination agreement in 2010, forfeiting my franchise fee. Can I claim this as a capital Loss to a net of 3000 / per year. Is the cost basis the original franchise fee How do I claim this as a capital loss?

asked 20 Mar '11, 00:50

TMichael's gravatar image

accept rate: 0%

I fail to understand how one could claim the sale of a capital asset in this case. First of all, there does not seem to be any capital asset. Second, there was no actual or deemed sale of an asset, if there was one.

Although the law on the subject is unclear, presumably one could deduct the franchise fee as an "expense for the production of income" on Schedule A as a miscellaneous itemized deduction. Although it is subject to the 2-percent limit of your AGI, this would seem to be the only place to possibly claim such a loss.


answered 20 Mar '11, 22:17

Bill-EA's gravatar image

accept rate: 3%

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Asked: 20 Mar '11, 00:50

Seen: 1,810 times

Last updated: 20 Mar '11, 22:17