Start Up Costs

[ACS41]

I have an S corp client with $4k worth of start up costs and want to take them in 2007. The program is amortizing them over 15 years. Since it is under $5K, I want to take the entire amount in 07. What am I missing in the asset entry section?

[Maribeth]

If the program is the same this year as last year, you cannot take the deduction through the asset manager. You have to just deduct the costs and not show it through asset manager.

Maribeth

[ACS41]

If the program is the same this year as last year, you cannot take the deduction through the asset manager. You have to just deduct the costs and not show it through asset manager.

Maribeth

I will do so. Thank you.

[BulldogTom]

Don't you have to make a §195 election to do that? Is that election on the elections form in ATX?

Just thinking out loud.

Tom

Lodi, CA

[Maribeth]

Tom, the election is made by deducting the expenses on the return. No statement is required. TTB pg 8-18.

Maribeth

[jainen]

>>No statement is required. TTB pg 8-18<<

Quickfinder doesn't agree with little brother on this point. It says make a formal election for the $5000 being deducted currently as well. The reason is a little unclear but runs something along the lines of, it's important to identify all startup costs because by the time IRS decides you have treated them as current expenses it will be too late.

[RoyDaleOne]

(B ) Time and manner of making election. The election to amortize start-up expenditures under section 195 shall be made by attaching a statement containing the information described in paragraph (C ) of this section to the taxpayer's return. The statement must be filed no later than the date prescribed by law for filing the return (including any extensions of time) for the taxable year in which the active trade or business begins. The statement may be filed with a return for any taxable year prior to the year in which the taxpayer's active trade or business begins, but no later than the date prescribed in the preceding sentence. Accordingly, an election under section 195 filed for any taxable year prior to the year in which the taxpayer's active trade or business begins (and pursuant to which the taxpayer commenced amortizing start-up expenditures in that prior year) will become effective in the month of the year in which the taxpayer's active trade or business begins.

(C ) Information required. The statement shall set forth a description of the trade or business to which it relates with sufficient detail so that expenses relating to the trade or business can be identified properly for the taxable year in which the statement is filed and for all future taxable years to which it relates. The statement also shall include the number of months (not less than 60) over which the expenditures are to be amortized, and to the extent known at the time the statement is filed, a description of each start-up expenditure incurred (whether or not paid) and the month in which the active trade or business began (or was acquired). A revised statement may be filed to include any start-up expenditures not included in the taxpayer's original election statement, but the revised statement may not include any expenditures for which the taxpayer had previously taken a position on a return inconsistent with their treatment as start-up expenditures. The revised statement may be filed with a return filed after the return that contained the election.

This a direct quote from "IRS" material, the editor or software use on this web site changes displays some characters in a different manner.

(d) Effective date. This section applies to elections filed on or after December 17, 1998.

[Maribeth]

Jainen, you're right. I checked the code and the 4562 instructions. Attach an election to the return. Thanks.

Maribeth

[jainen]

>>>>Jainen, you're right.<<

Thanks, but it would be arrogant to stuff my shirt like a big know-it-all. I just reported what a similar reference said about it.

I took a first look at The Tax Book this year. There seem to be quite a few topics where, like this one, Quickfinder offers a more useful position or at least better explanation and support. (Of course, neither books tries to be comprehensive, and I might have a little bias because The Tax Book message board gave me a cold shoulder.)

[OldJack]

>>There seem to be quite a few topics where, like this one, Quickfinder offers a more useful position or at least better explanation and support. <<

Jainen you are being too nice. I also took a look and found it to be lacking and misleading in many subjects. I would not rely on That Tax Book's opinions and therefore subscribe to Quickfinder and other resources. If a tax pro is only using That Tax Book as their tax resource they may be gambling with their reputation and malpractice insurance.