- 17 -
Indeed, the evidence available suggests that these expenditures
were capital expenditures.
To be deductible, the expenses must also have been paid or
incurred after the taxpayer's trade or business actually
commenced; expenses incurred prior to that time are nondeductible
preopening expenses. Richmond Television Corp. v. United States,
345 F.2d 901, 907 (4th Cir. 1965), vacated and remanded on other
issues 382 U.S. 68 (1965), original holding on this issue reaffd.
354 F.2d 410, 411 (4th Cir. 1965), overruled on other grounds
NCNB Corp. v. United States, 684 F.2d 285, 288-289 (4th Cir.
1982); Jackson v. Commissioner, 86 T.C. 492, 514 (1986), affd.
864 F.2d 1521 (10th Cir. 1989); Goodwin v. Commissioner, 75 T.C.
424, 433 (1980), affd. without published opinion 691 F.2d 490 (3d
Cir. 1982); McManus v. Commissioner, T.C. Memo. 1987-457, affd.
without published opinion 865 F.2d 255 (4th Cir. 1988); see also
sec. 195.9
Section 162 does not allow deductions for otherwise
deductible expenses until such time as the trade or
business begins to function as a going concern even
though the taxpayer may have made a firm decision to
enter into business and has expended considerable sums
of money in preparation of commencing business. * * *
[Jackson v. Commissioner, supra at 514.]
9Sec. 195 provides that preopening or startup expenses are
not fully deductible in the year incurred and must be amortized
over a period of not less than 60 months beginning with the month
in which the taxpayer begins business. We make no determination
as to whether these expenses would qualify as sec. 195 expenses
if and when the trade or business begins.
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