- 10 - expenses must relate to a trade or business functioning at the time the expenses were incurred. See, e.g., Hardy v. Commissioner, 93 T.C. 684, 687 (1989), affd. in part and remanded in part per order (10th Cir., Oct. 29, 1990). A taxpayer is not carrying on a trade or business for section 162(a) purposes until the business is functioning as a going concern and performing the activities for which it was organized. Richmond Television Corp. v. United States, 345 F.2d 901, 907 (4th Cir. 1965). Carrying on a trade or business requires a showing of more than initial research into or investigation of business potential. Dean v. Commissioner, 56 T.C. 895, 902 (1971); McKelvey v. Commissioner, T.C. Memo. 2002-63, affd. 76 Fed. Appx. 806 (9th Cir. 2003). Business operations must have actually commenced. Dean v. Commissioner, supra at 902; McKelvey v. Commissioner, supra. As noted above, petitioner has not brokered any mortgages. Although she did take a class, any efforts petitioner made to establish her mortgage services as a business and an activity engaged in for profit are more appropriately described as startup activities, or investigative activities, and not the activities of a going concern such that any of her expenses in this arena would be considered properly deductible under section 162.5 5 Startup expenditures must be capitalized and may be amortized under sec. 195 once the activity begins.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 NextLast modified: March 27, 2008