Sch C Expenses

[Pat]

Client has a real estate brokers license but hadn't sold anything in several years. During 07, he was going to start selling again and rejoined MLS, installed phones, logo, registered a name, etc. Then his wife was diagnosed with a rapid spreading cancer and everything stopped. All he sold in 07 was his own property which will go on a Sch D.

Can he expense the start up expenses on the Sch C since he didn't sell anything or could the expenses be added to the basis of his sold property? Or should they just fall by the wayside?

Thank you

Pat Eure, EA

[kcjenkins]

I would take the deductions, since he spent the money for a legitimate business purpose, with full intent to make a profit. Just because the situation changed does not negate that. If he still intends to later restart again, you might want to capitalize them and spread them out over the future years, but if he can use them this year, I'd be inclined to advise taking them now. None of us know what the future will bring, so a dollar of tax saved now is worth more, in most cases, than a dollar of taxes saved in the future.