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Observing that section 195 as originally enacted9 in the
Miscellaneous Revenue Act of 1980, Pub. L. 96-605, sec. 102(a),
94 Stat. 3522, was ambiguous and caused excessive litigation, in
1984 Congress amended the statute. Deficit Reduction Act of
1984, Pub. L. 98-369, sec. 94(a), 98 Stat. 614; S. Prt. 98-169
(Vol. I), at 282-283 (1984). The Senate print accompanying the
Deficit Reduction Act of 1984 stated that the intent of Congress
in amending the statute was to “decrease the controversy and
litigation arising under present law with respect to the proper
tax treatment of start-up expenditures” by requiring expenses
similar to those allowed as deductions in Hoopengarner to be
capitalized. S. Prt. 98-169 (Vol. I), supra at 283. The purpose
of the 1984 amendment to section 195 was to bring sections 212
and 162 into parity when determining whether an expenditure has
been incurred in a startup activity.
9 As originally enacted sec. 195(b) defined “startup
expenditures” to mean any amount:
(1) paid or incurred in connection with--
(A) investigating the creation or acquisition of
an active trade or business, or
(B) creating an active trade or business, and
(2) which, if paid or incurred in connection with the
expansion of an existing trade or business * * * would
be allowable as a deduction for the taxable year in
which paid or incurred.
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Last modified: May 25, 2011