Discussion:New Real Estate Business - Still Confused

Teacher retires and wants to start a real estate business. He takes seminars to learn how to be a real estate agent, and also takes general success seminars. Incurs expenses in 2007, but no income yet (still no income in 2008).

Are the seminar expenses deductible as startup costs on 2007? 2008? Not at all? Or, deductible as education expenses elsewhere?

I really tried to find the answer on the boards before I posted this question, but there seems to be a lot of disagreement on this, plus some of the discussions took place before you could deduct $5K of startup costs.

Help? Anyone? Thanks in advance.

One last piece of info that may or may not help: he has several rental homes... could this possibly be deducted on Schedule E if doesn't qualify as startup costs?

TITLE 26, Subtitle A, CHAPTER 1, Subchapter B, PART VI, Sec. 197. STATUTE (a) General rule A taxpayer shall be entitled to an amortization deduction with respect to any amortizable section 197 intangible. The amount of such deduction shall be determined by amortizing the adjusted basis (for purposes of determining gain) of such intangible ratably over the 15-year period beginning with the month in which such intangible was acquired.

Is this the Code Section you will rely upon to claim the deduction?

WPCPA - I can read codes until I'm blue in the face and still not know the answer... what I need to know is what others are doing in this situation.

If this were your client, how would you advise them...

1. take the deduction for the seminar now as startup costs? 2. take the deduction in 2008 assuming he earns income from this business? 3. tell the client no deduction, period? 4. something else entirely?

I'm asking for what you would do for this client, not for a code section. Thanks.