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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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