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Accordingly, respondent is sustained on this issue.
Issue 2. Ancient Artifacts Business
Respondent determined that the claimed deductions for
petitioner's ancient artifacts activities were startup expenses
pursuant to section 195 and therefore not deductible since they
were not related to an active trade or business. Petitioner
asserts that he was in the business of dealing in ancient
artifacts during 1990.
Section 162(a) allows a deduction for ordinary and necessary
expenses of carrying on a trade or business. In order for
expenses to be deductible under section 162, they must relate to
a trade or business functioning at the time they are incurred.
Hardy v. Commissioner, 93 T.C. 684, 687 (1989). Startup or
preopening expenses are not currently deductible under section
162. Id.
Section 195(a) generally disallows all deductions for
startup expenditures. Startup expenditures are defined as
amounts paid or incurred in connection with: (1) Investigating
the creation or acquisition of an active trade or business, (2)
creating an active trade or business, or (3) any activity engaged
in for profit in anticipation of the activity's becoming an
active trade or business. Sec. 195(c)(1)(A). Second, these
costs must be the type of costs that would be currently
deductible if paid or incurred in connection with the operation
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