When a restaurant gets renovated by Gordon Ramsay, they get a new kitchen, new lights, etc. How do you account for those on a tax return?

Question

The business did not buy them, nor did an owner trade an asset for higher portion of capital

YES the business DID pay for them. If nothing else, they paid in the form of allowing the restaurant to be used on TV.

I GUARANTEE the shows producers have attorneys and tax professionals that spent years addressing this question.

Does the business just list the new assets with a basis of $0.00? I ask because when a person wins a prize on a game show they have to pay taxes on the prizes they keep... so would these businesses have to pay tax on FMV of the gifts they recieve as non operating-income as well?

Do they just realize the gain for whatever they end up selling these gifts and/or the business as a whole and have it factor into to any profit on the sale?

I could probably take 90 minutes bouncing around the IRS website to find out, but I thought maybe someone could point me in the right direction, or provide me with an answer.

Thank you.

Tavy · Accepted Answer

The equipment is not free, the owner has to pay for it and the production company installs it.
This is the way it is on improvement programmes in the UK.
They just make it look like a gift.

STEVEN F · Answer

The business did not buy them, nor did an owner trade an asset for higher portion of capital
YES the business DID pay for them. If nothing else, they paid in the form of allowing the restaurant to be used on TV.
I GUARANTEE the shows producers have attorneys and tax professionals that spent years addressing this question.

curtisports2 · Answer

If you didn't pay for them, you don't claim them in any way, shape or form on your return. In whatever form the business compensates the production company, that would be shown on the return.

David 14 · Answer

No. Those are gifts. However, obviously the business can't take depreciation as they have no cost basis.

? · Answer

All of it is income. It isn't a gift.

However, I  doubt they own the property so these become leasehold improvements.

The accounting and taxation on these programs has been dodgy.

ocularnervosa · Answer

They have to claim the amount of the repairs in additional income under a gift. If it is less than $10,000 they won't have to pay taxes on it but anything over that and they will owe.

ali · Answer

Heheheje

When a restaurant gets renovated by Gordon Ramsay, they get a new kitchen, new lights, etc. How do you account for those on a tax return?

7 Answers