George Kukes and Margaret Kukes - Page 8

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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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