Arthur L. Rubin <ronnirubin[at]sprintmail.com> wrote:

- quote -

I agree. If the business has a physical location that is
open to the public (store, restaurant, warehouse, etc.), the
"opening" date should be fairly obvious. But, with other
types of businesses, it is by no means clear. I think your
"ready and able" test pretty well covers it.

MTW

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Jimmy Smith wrote:

- quote -

I can't agree with that. In "internet retail", that may
be the case, but the general rule is probably that if
you are ready and able to make the first sale, your
business has started, even if you don't actually make
a sale for some time.

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Jimmy Smith wrote:

- quote -

Not really--Section 195 doesn't have an exemption of that
sort. However, what you can do is fail to elect to amortize
and then you eliminate the administrative hassle--because
you don't get to deduct it until you sell the business
<grin> .

Seriously, I would go ahead and amortize the $1,600. Reality
is that I've had agents question capitalization on items a
*lot* smaller than that and the requirement to amortize is
absolutely clear in the IRC. They almost certainly would
prevail if they disallowed it and went to Tax Court on the
matter.

Now if you just write it off, the reality is that you've
failed to elect to amortize and on exam the IRS can simply
force you to capitalize it.

--
Ed Zollars, CPA
Phoenix, Arizona

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Is there a practical lower limit to the amount of startup
costs that need to be amortized?

I had about $1600 in expenses prior to the first sale in my
internet retail business. Mostly the costs were for web
hosting, software (including QuickBooks), software
development books and miscellanous office supplies.

If I understand the rules, my business didn't "start" until
that first sale occurred - is that a set-in-stone
interpretation or is there some leeway for declaring the
"start" date?

It seems to me that going to the trouble of amortizing that
piddly amount over 5 years is a lot of administrative hassle
that's barely going to make any difference in what the IRS
gets from me. My life and the IRS's life would be a lot
easier if I just treated those expenses as a regular
deductible business expense.

But if it's a big enough issue that I'll get nailed to the
wall over it during an audit, I want to be sure I do it
right from the outset...

Suggestions?

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