- 28 -
who cleared and prepared logging roads on the premises. Id. The
taxpayer also made incidental sales of two walnut trees to the
woodsman and of firewood generated from the clearing activities.
Id. Nevertheless, observing that the taxpayer had not acquired
an already functioning business and citing Richmond Television
Corp. v. United States, 345 F.2d at 907, this Court found a new
business had not yet begun. Reems v. Commissioner, supra.
Therefore, section 195 applied on grounds that the endeavor
constituted a startup within the meaning of that statute. Id.
Again, the record here does not reveal that Shrike Cars’
activities in 1998 had progressed beyond preparatory steps such
as those identified in McKelvey v. Commissioner, supra, and Reems
v. Commissioner, supra, or had risen to the level of formal
commitment with material efforts toward a specific project as was
shown by the taxpayers in Cabintaxi Corp. v. Commissioner, 63
F.3d 614 (7th Cir. 1995), Blitzer v. Commissioner, 231 Ct. Cl.
236, 684 F.2d 874 (1982), and Lamont v. United States, 80 AFTR 2d
97-7320, 97-2 USTC par. 50,861 (Fed. Cl. 1997). The Court holds
that the costs claimed on petitioners’ Schedule C for Shrike Cars
are startup expenditures falling within the purview of section
195. Accordingly, petitioners must capitalize such costs to the
extent substantiated and are not entitled to reduce their 1998
gross income by the claimed loss of $448,120 derived from Shrike
Cars.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011