Charles A. and Carol M. Willits - Page 9




                                        - 9 -                                         
          during the years at issue properly belong to the corporation and            
          not petitioner.                                                             
               Moreover, those expenses were nondeductible, preopening                
          expenses.  See sec. 195; 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).  Startup                    
          expenditures generally cannot be deducted or amortized except as            
          allowed by section 195(a), which permits an election to amortize            
          them over a period of 60 months, starting with the month in which           
          an active business begins.  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.  See sec. 195(c)(1)(A).  Startup costs            
          include advertising, travel, and other expenses incurred in                 
          lining up prospective distributors, suppliers, or customers, and            
          salaries or fees paid or incurred for executives, consultants,              
          and similar professional services which are incurred after a                
          decision is made to establish a business and before the business            
          begins.  See H. Rept. 96-1278, at 10, 11 (1980), 1980-2 C.B. 709,           
          712.                                                                        
               Petitioner acknowledged that there were no investors and no            
          income, the parties did not have any plans or facilities for                






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011