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accounting to value his inventory at yearend. Petitioner
testified that when the mall opened in the spring of 1995, he
moved the inventory into the store and offered it for sale to
customers. Petitioner did not offer the inventory for sale to
customers in 1994, and he offered no other identifiable event to
substantiate the value of his inventory. See Thor Power Tool Co.
v. Commissioner, 64 T.C. 154, 169 (1975), affd. 563 F.2d 861 (7th
Cir. 1977), affd. 439 U.S. 522 (1979). Petitioner, therefore, is
not entitled to cost of goods sold under the lower of cost or
market method of accounting in 1994.
Startup Expenses
Section 195 provides generally that no deduction shall be
allowed for startup expenditures; however, such expenses, at the
election of the taxpayer, may be treated as deferred expenses and
allowed as a deduction prorated equally over a period of not less
than 60 months as may be selected by the taxpayer beginning with
the month in which the active trade or business begins. Due to
an unfortunate set of circumstances beyond petitioner's control,
petitioner did not begin a trade or business activity during
1994. Thus, no deduction is allowable for petitioner's startup
expenses incurred in 1994.
To reflect the foregoing,
Decision will be
entered for respondent.
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Last modified: May 25, 2011