startup and expense

[TAXMAN]

What I have. TP already in business as a S-Corp. Goes to another State to set up same type of business only as a sole propiter. Incurred costs of buying building, renovating building, buying assets to be used in business, engineer fees, and interest on debt to buy and remodel. TP did this in 2012 opened doors 2013. Has yet to file his 2012 personal return. If you are looking at 2012 would you use $5000.00 start up and capital rest? what do you do with interest paid on note in 2012? For some reason I cannot get this through my thinker. Help and suggestions appreciated.

[Jack from Ohio]

All expenses are startup costs that are amortized 15 years in 2013. You are overthinking this one.

[Lion EA]

Except for the depreciable assets which begin depreciation when placed in service/business opened doors.

[Jack from Ohio]

Except for the depreciable assets which begin depreciation when placed in service/business opened doors.

AGREE.

[jklcpa]

The interest paid on the debt associated with the purchase and remodeling should also be capitalized as part of the building as well as the engineering fees if those were directly associated with the remodeling. Agree with Lion above on the depreciable assets. Depreciation starts when those assets are placed in service in 2013.

[Mr. Pencil]

looking at 2012 would you use $5000.00 start up and capital rest?

Since he was not conducting a trade or business in 2012, nothing is deductible in 2012. The costs you describe all sound to me like depreciable assets starting when the business opened 2013. Closer analysis might identify some as consumable supplies or other operating-like costs, which could be treated as Section 195 startup expenses starting in 2013.

I would also document at least general inquiry into whether the expenses could be considered made on behalf of the corporation. I would look for clear separation of cash flow and other assets, including intangibles like business systems and marketing. I would also look for a non-tax purpose in setting up a parallel company, especially if either of those companies is in a tax-mad state like California.

[WITAXLADY]

DID the $5000 write-off for business start-up expire?

[mcb39]

DID the $5000 write-off for business start-up expire?

I believe it gets amortized for 15 years from the date he actually started doing business.

[Mr. Pencil]

DID the $5000 write-off for business start-up expire?

No, you might be remembering the temporary increase to $10,000 in 2010. But the original post was asking about more than $50,000 total expenses, so even the $5000 maximum could be reduced (although I think little or none was actually startup expenses as defined in Section 195).

Another recent change is that the election to deduct/amortize is deemed made unless affirmatively elected OUT. The amortization period is 180 months, which is not exactly the same as 15 years.