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A taxpayer bears the burden of proving that he or she
executed a timely election to amortize startup expenditures. See
Krebs v. Commissioner, T.C. Memo. 1992-154; Pino v. Commissioner,
T.C. Memo. 1987-28. Petitioners have not established that they
executed a timely election. The record indicates that
petitioners fully deducted in taxable year 2000 the startup
expenditures incurred in 1998 and 1999 for Hansie Productions.
The record further indicates that petitioners did not provide a
description of each startup expenditure and did not amortize
their expenditures. Respondent disallowed the entire amount of
the deduction. The Court sustains respondent on this issue. See
Krebs v. Commissioner, supra; Pino v. Commissioner, supra.
D. Cost of Goods Sold
In calculating gross income, taxpayers may offset gross
revenue with CGS. B.C. Cook & Sons, Inc. v. Commissioner, 65
T.C. 422, 428 (1975), affd. 584 F.2d 53 (5th Cir. 1978).
Pursuant to regulations promulgated under section 162, “The cost
of goods purchased for resale, with proper adjustment for opening
and closing inventories, is deducted from gross sales in
computing gross income.” Sec. 1.162-1(a), Income Tax Regs.; see
sec. 1.61-3, Income Tax Regs. Taxpayers are required to take
“inventories at the beginning and end of each taxable year” in
which “the production, purchase, or sale of merchandise is an
income-producing factor.” Sec. 1.471-1, Income Tax Regs. There
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