S-corp start up cost entry?

[joanmcq]

I'm doing an S-corp that did no business in 2012, but did incurr start up costs, that they are electing to fully amortize starting in 2013. I cannot figure out how in ATX to get the expenses to show 'per books' on the M-1, but bring the income to zero 'per tax'. I've tried every permutation I can find, and it always either leaves only M&E on line 1 or doubles the amount on line 1.

How I'm feeling about corps at this point.

[imjulier]

Joan-

I'm not in front of my program or I would open it up for a better look but the transactions you are describing are balance sheet transactions for both book and tax purposes. If the asset is entered in ATX with a 2013 date no amortization for 2012 and no expenses. The balance sheet would show the asset (start up costs) which is not yet placed in service and a loan from the shareholder. Maybe cash if the SH opened a bank account. Not sure what I am missing here but I would be filing zero expenses. I hope this helps. It will be interesting to see what others reply or to see what I am missing.

Julie

[jainen]

>>electing to fully amortize<<

Can you still do that? I thought after 2008, the election is to deduct the first $5000, and only amortize the rest.

[Lee B]

I thnk Julie has it right. I would do it that way.

[joanmcq]

There's an election to waive the election. The $5000 expense is the default.

But that point is moot for the question since the biz didn't 'open' until 2013. Thanks Julie, I'll try that. I wasn't thinking of the start up cost in terms of an asset. That helps!

[jainen]

>>There's an election to waive the election.<<

Yes? According to Pub 535, "You can choose to forgo this election by affirmatively electing to capitalize your start-up costs." I believe "capitalize" means you can't recover the expenses until the business is sold.

[joanmcq]

The same phrase is in the Quick Answers. The sentence below says "expenses that are not currently deductible are amortized over 180 months".

Normally, to capitalize expenses means to depreciate them. Do we have a cite that is authority?

[jainen]

>>Normally, to capitalize expenses means to depreciate them<<

No, capitalize just means to treat as an asset (balance sheet) rather than a deductible expense (P&L). MACRS only applies to particular assets, mostly tangible, Pub 535 explains, "When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Generally, you recover costs for particular assets through depreciation deductions. However, you generally cannot recover other costs until you sell the business or otherwise go out of business."

Section 195 itself says,

"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."

Summary: Deduct in 2013, except amortize anything ove $5000. Or, leave on the books to reduce capital gain when the business is sold.