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1992 (and up until the time of trial), petitioner had not yet
developed a product for sale, had not advertised such a product,
had no bank account books or records, and had never received any
income from Presto, and that Presto has never been a going
concern. Petitioner simply had a concept that had not yet taken
a concrete, marketable form. We therefore need not delve into
petitioner's state of mind regarding profit objective, because it
is clear that, at most, petitioner was merely in the startup
phase of a potential business.4
Courts have consistently denied deductions for startup or
preopening expenses incurred by taxpayers prior to beginning
business operations. Courts have articulated two rationales for
concluding that such expenses are not deductible under section
162(a): (1) That the taxpayer was not “carrying on” a trade or
business, Kantor v. Commissioner, 998 F.2d 1514, 1518 (9th Cir.
1993), affg. in part and revg. in part T.C. Memo. 1990-380;
Aboussie v. United States, 779 F.2d 424, 428 (8th Cir. 1985);
Richmond Television Corp. v. United States, 345 F.2d 901, 907
(4th Cir. 1965), vacated and remanded per curiam on other grounds
382 U.S. 68 (1965), or (2) that preopening expenses were not
“ordinary” but capital in nature, Madison Gas & Elec. Co. v.
Commissioner, 633 F.2d 512, 517 (7th Cir. 1980), affg. 72 T.C.
521 (1979); Hardy v. Commissioner, 93 T.C. 684 (1989). However,
4 If, however, we were to consider respondent’s other
arguments, we would find them well taken.
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