Start-Up Costs Amortized

[GraceNY]

Taxpayer started business in 2004. Some start-up costs were incurred prior to 10/22/04 and an election was made to amortize those costs over 60 months. No depreciable property, just a fee paid to company to become direct seller and materials purchased to train to be a seller of the product...$2,000. In 2007 taxpayer decides they no longer want to pursue buisness, made $0. What happens to the balance of those start-up costs being amortized? If they are written off on the 2007 return, how does one answer the SCH C question "materially participated in buisness in 2007?" (taxpayer didn't and that's why $0 income). Does that make it a passive loss?

Thanks in advance for replies

Grace

[RoyDaleOne]

You can write-off the remaining basis 2007.

Don't over work some of the questions:

"materially participated in business in 2007"

answer I would give is yes, because whatever participation there is is from your client.

In other words his participation is 100% of all the participation for 2007.

[OldJack]

What happens to the balance of those start-up costs being amortized? If they are written off on the 2007 return, how does one answer the SCH C question "materially participated in buisness in 2007?" (taxpayer didn't and that's why $0 income).

Just because there was no income does not mean the taxpayer did not materially participate in the business. You have to be careful about making decisions for the taxpayer (such as did not participate). If the business has ended the start-up costs would be written off as expense on the final 1040 Sch-C regardless of participation. No it is not a passive loss unless it was a passive type activity.