Dora Margaret Benson - Page 11




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         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.                          





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