Discussion:Start of business
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Discussion Forum Index --> Basic Tax Questions --> Start of business
Discussion Forum Index --> Tax Questions --> Start of business
| 11 March 2008 | |
| What constitutes the start of a business? Taxpayer incurred expenses to research etc., then formed an LLC, so there are expenses for 2007 before and after incorporating. However, the type of business is food production and there is no product yet, that is, the product is developed (recipe, etc.) but plans to do a production run in Spring 2008. Is the business considered started when formed the LLC, when started researching the business, or when the product is available for sale. And, if considered started when the production run takes place, what to do with 2007 expenses - expense $5k and amortize the rest??? Thanks. | |
| 11 March 2008 | |
| 24 looks and no input. Does anyone have any leads??? Any help or input would be appreciated. | |
| 11 March 2008 | |
| Kevtax,
I generally agree with your last complete sentence: "considered started when the production run takes place, The amortization period for deducting organization costs and start-up costs begins on the first day of the month the active trade or business begins. Sounds like that would be spring 2008. Perhaps if you'll take a few minutes to complete your profile and let us know who you are you'll get more responses to your inquiries. It's nice to know who we are replying to. | |
| 11 March 2008 | |
| Kevtax:
you might get replies if you fill out your profile you might not like those replies but it wouldn't hurt to try! Good Luck TexCPA 17:02, 11 March 2008 (CDT) | |
| 12 March 2008 | |
| KEVTAX-
We just had a discussion on this last week. Not sure it was conclusive however. I just looked quickly at Reg 1.195-1, and it was little help. I think in your case you expense $5,000 and amortize the rest. Or amortize it all. If you had any income you would be limited to a $5,000 dedcution, and I think that is the gist of Sec 195, to keep startups from expensing the heck out of eveything. If there is no income in 2007, any amount you deduct is going to carryforward anyway, right? It seems like IRC Sec 195 is set up to allow deduction of $5,000, and requiring amortization of the rest. | |
| 12 March 2008 | |
| My friend incorporated on 10/17/2007. Before that, on September of 2007 and on the beginning of the October, he purchased equipment and vehicle with cash. Vehicle is a 1 tone truck; he registered it to the corporation. Equipment is used 100% in business
(he is in construction business). He spent on it over 15,000. Now is my question … On 1120-S, can he expense purchase made with cash before incorporation? Or should he include vehicle and equipment as Additional Paid-In Capital and depreciate it? | |
