Pre Open Costs, business never opened

[KEYWEST_RICKS]

Someone had expenses for utilities, rent, supplies etc to open a schedule c business before the doors actually opened. problem with license and zoning and the business never opened. not a corp or llc but a sole prop. What are those costs?? Pre Open would have been cap. and then amortized or deducted. do you say on sch c still or as a capital loss subject to 3000 limit on sch d?

thanks

jeff

[Terry D EA]

The costs of rent, utilities, supplies, etc are operating expenses and are not considered organizational costs or startup costs so they would not be capitalized nor amortized. I would deduct them as expenses on Schedule C with no income.

Terry D.

[michaelmars]

not able to look up now but there is a specific place to report abandoned business startup costs. can't remember if its line 21 or sch d etc.

for practical purposes you can take on c but that might effect ss taxes on other income. if all other inc is wages and there is no ss taxes on the return then just take on c

[OldJack]

From 2008 Small Business Quickfinder Handbook, page M-7:

>> Failed Business—Individual Business Start DateFailed Attempt—Individuals

If an individual incurs costs to go into business and the attempt fails, the expenses fall into one of two categories.

1)Costs incurred before making a decision to acquire a specific business are personal and non-deductible. This includes costs associated with a general search, preliminary investigation or investment possibility.

2)Costs associated with a failed attempt to acquire a specific business are deductible as miscellaneous itemized deductions subject to the 2% of AGI floor. The taxpayer does not need to actually enter the business to obtain the deduction. [iRC §165©(2) and 67( b ); Rev. Rul. 77-254]

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