- 12 -
if it is normal or customary within a particular trade, business,
or industry. Deputy v. du Pont, 308 U.S. 488, 495 (1940). An
expense is necessary if it is appropriate and helpful for the
development of the business. Commissioner v. Heininger, 320 U.S.
467, 471 (1943).
Implicit in the foregoing definitions is the concept that a
taxpayer must in fact be “carrying on” a trade or business for
expenditures to be deductible under section 162. This limitation
is made explicit in section 195, as follows:
SEC. 195. START-UP EXPENDITURES.
(a) Capitalization of Expenditures.--Except as
otherwise provided in this section, no deduction shall
be allowed for start-up expenditures.
(b) Election To Amortize.--
(1) In general.--Start-up expenditures may,
at the election of the taxpayer, be treated as
deferred expenses. Such deferred expenses shall
be allowed as a deduction prorated equally over
such 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).
(2) Dispositions before close of amortization
period.--In any case in which a trade or business is
completely disposed of by the taxpayer before the end
of the period to which paragraph (1) applies, any
deferred expenses attributable to such trade or
business which were not allowed as a deduction by
reason of this section may be deducted to the extent
allowable under section 165.
(c) Definitions.--For purposes of this section--
(1) Start-up expenditures.--The term “start-
up expenditure” means any amount--
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011