Internal Revenue Code:Sec. 195. Start-up expenditures
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART VI - ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
Statute
Sec. 195. Start-up expenditures
(a) Capitalization of expenditures
Except as otherwise provided in this section, no deduction shall
be allowed for start-up expenditures.
(b) Election to deduct
(1) Allowance of deduction.--If a taxpayer elects the
application of this subsection with respect to any start-up
expenditures--
(A) the taxpayer shall be allowed a deduction for
the taxable year in which the active trade or business
begins in an amount equal to the lesser of--
(i) the amount of start-up expenditures with
respect to the active trade or business, or
(ii) $5,000, reduced (but not below zero) by
the amount by which such start-up expenditures
exceed $50,000, and
(B) the remainder of such start-up expenditures
shall be allowed as a deduction ratably over the 180-
month period beginning with the month in which the
active trade or business begins.
(2) Dispositions before close of amortization period
In any case in which a trade or business is completely disposed
of by the taxpayer before the end of the period to which
paragraph (1) applies, any deferred expenses attributable to such
trade or business which were not allowed as a deduction by reason
of this section may be deducted to the extent allowable under
section 165.
(c) Definitions
For purposes of this section -
(1) Start-up expenditures
The term ''start-up expenditure'' means any amount -
(A) paid or incurred in connection with -
(i) investigating the creation or acquisition of an active
trade or business, or
(ii) creating an active trade or business, or
(iii) any activity engaged in for profit and for the
production of income before the day on which the active trade
or business begins, in anticipation of such activity becoming
an active trade or business, and
(B) which, if paid or incurred in connection with the
operation of an existing active trade or business (in the same
field as the trade or business referred to in subparagraph
(A)), would be allowable as a deduction for the taxable year in
which paid or incurred.
The term ''start-up expenditure'' does not include any amount
with respect to which a deduction is allowable under section
163(a), 164, or 174.
(2) Beginning of trade or business
(A) In general
Except as provided in subparagraph (B), the determination of
when an active trade or business begins shall be made in
accordance with such regulations as the Secretary may
prescribe.
(B) Acquired trade or business
An acquired active trade or business shall be treated as
beginning when the taxpayer acquires it.
(d) Election
(1) Time for making election
An election under subsection (b) shall be made not later than
the time prescribed by law for filing the return for the taxable
year in which the trade or business begins (including extensions
thereof).
(2) Scope of election
The period selected under subsection (b) shall be adhered to in
computing taxable income for the taxable year for which the
election is made and all subsequent taxable years.
Sources
(Added Pub. L. 96-605, title I, Sec. 102(a), Dec. 28, 1980, 94
Stat. 3522; amended Pub. L. 98-369, div. A, title I, Sec. 94(a),
July 18, 1984, 98 Stat. 614.)
Miscellaneous
AMENDMENTS
2004 - Subsec.902(a),Pub.L.108-357, amended Sec.195(b) by
amending paragraph (1)to read as follows:
"(1) Allowance of deduction.--If a taxpayer elects the
application of this subsection with respect to any start-up
expenditures--
(A) the taxpayer shall be allowed a deduction for
the taxable year in which the active trade or business
begins in an amount equal to the lesser of--
(i) the amount of start-up expenditures with
respect to the active trade or business, or
(ii) $5,000, reduced (but not below zero) by
the amount by which such start-up expenditures
exceed $50,000, and
(B) the remainder of such start-up expenditures
shall be allowed as a deduction ratably over the 180-
month period beginning with the month in which the
active trade or business begins."
2004 - Subsec.902(a),Pub.L.108-357, amended Sec.195(b)
by striking ``Amortize'' and inserting ``Deduct'' in the
heading.
1984 - Subsec. (a). Pub. L. 98-369 amended subsec. (a) generally,
substituting provisions dealing with capitalization of expenditures
for provisions dealing with election to amortize.
Subsec. (b). Pub. L. 98-369 amended subsec. (b) generally,
substituting provisions dealing with election to amortize for
provisions dealing with start-up expenditures.
Subsec. (c). Pub. L. 98-369 amended subsec. (c) generally,
substituting provisions setting forth definitions for provisions
dealing with election.
Subsec. (d). Pub. L. 98-369 amended subsec. (d) generally,
substituting provisions dealing with election for provisions
dealing with business beginning.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by Pub.L.108-357,Sec,902(a), shall apply to amounts
paid or incurred after the date of the enactment of this Act.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 94(c) of Pub. L. 98-369 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after June 30, 1984.''
EFFECTIVE DATE
Section 102(c) of Pub. L. 96-605 provided that: ''The amendments
made by this section (enacting this section) shall apply to amounts
paid or incurred after July 29, 1980, in taxable years ending after
such date.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 543, 1202 of this title.
