- 8 - active trade or business are start-up expenditures. Sec. 195(c). Section 195(a) generally precludes taxpayers from deducting start-up expenditures. However, for the years at issue, section 195(b) generally allowed taxpayers to elect to amortize start-up expenditures over a period not less than 60 months, beginning (at the earliest) in the year in which the active trade or business commences.5 If the start-up expenditures relate to an endeavor that never rises to the status of an active trade or business, a taxpayer may not amortize the start-up expenditures. See Bernard v. Commissioner, T.C. Memo. 1998-20. In the matter before us, respondent’s notice of deficiency makes no mention of section 195, the language of section 195, or the principles upon which section 195 rests. The record does not establish that respondent raised section 195 during the examination of petitioner’s income tax returns or otherwise notified petitioner that section 195 was relevant to his determination. Respondent’s section 195 argument is therefore new matter, and respondent bears the burden of proof with respect to section 195. Rule 142(a). 5 In 2004, Congress amended sec. 195(b) to allow electing taxpayers to deduct start-up expenditures over a period of 180 months beginning with the month in which the active trade or business begins. American Jobs Creation Act of 2004, Pub. L. 108-357, sec. 902(a)(1), 118 Stat. 1651. Sec. 195 applies as so amended to amounts paid or incurred after Oct. 22, 2004.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 NextLast modified: November 10, 2007