§195 — Start-up expenditures

29, 1990), we overruled our Opinion in Hoopengarner v.

Petitioner asserts that INDOPCO is not controlling because it did not overrule a long line of cases (e.g., Briarcliff Candy Corp.

195. Sec. 1.195-1, Income Tax Regs. Petitioners maintain that their business expenses were not startup expenses and that petitioner's business activity in 2014 should not be classified as a startup. Petitioners also did not make a sec. 195(b) election to have their business expense deductions classified as startup expenditures. Because the Court will treat petitioner's consulting activity as an active trade or business during the relevant tax year, see infra pp. 9-10, sec. 195 does not apply.

As a prelimina matter, we note that petitionertreated all his activities as one, having filed one Schedule C, and respondent does not distinguish among petitioner's activities f:>rpurposes ofhis section 195 argument.

Given our holding, the Court need not decide the interplay (ifany) between secs.

Given our holding, the Court need not decide the interplay (ifany) between secs.

Given our holding, the Court need not decide the interplay (ifany) between secs.

Petitioner alleged that even if she is unable to deduct he r rental real estate activity losses under section 469 ,'-she should be entitled to deduct the costs of her rental real estate activity under 'sections 212, 162 and/or 195 .'6 5The'Court need not decide whether she materially participated in her rental real estate activity .

However, we do not agree with petitioner's proposition that the claimed purpose of the expenditures--to protect, promote, or expand its existing business--is controlling.

Section 195 requires taxpayers to capitalize startup expenditures.

Petitioner’s Alternative Arguments To the extent we hold that he may not deduct any of the engineer expenses as section 162 trade or business expenses, petitioner argues that he can deduct them as section 174 research or experimental expenditures, or as costs of developing computer software under Rev.

- 35 - [*35] Section 195 applies to both section 162 activities and section 212 activities.

Startup expenses, although not deductible during the pre-opening phase, may generally be deducted or capitalized and deducted over time upon a taxpayer's becoming actively engaged in business pursuant to section 195.

Startup expenses, although not currently deductible, may generally be deducted over time pursuant to section 195.

At best, according to petitioner's description ofthe activity, any expenses paid or incurred in connection with it would have to be capitalized and could be deducted only as allowable startup expenditures pursuant to section 195.

- 6 - 'pre-opening' expenses."6 Startup expenses, although not currently deductible, may generally be deducted over time pursuant to section 195.7 Whether a taxpayer's activities constitute the carrying on ofa trade or business requires an examination ofthe facts and circumstances ofeach case.8 The Court has focused on three factors to indicate the existence ofa trade or business: (1) whetherthe taxpayerundertook the activity intending to e

- 6 - 'pre-opening' expenses."6 Startup expenses, although not currently deductible, may generally be deducted over time pursuant to section 195.7 Whether a taxpayer's activities constitute the carrying on ofa trade or business requires an examination ofthe facts and circumstances ofeach case.8 The Court has focused on three factors to indicate the existence ofa trade or business: (1) whetherthe taxpayerundertook the activity intending to e

Therefore, we hold that the expenses petitioner claimed on his Schedule C for 2007 were paid to create a planned real estate business and were paid before that business commenced.

2 .' Startup Expenditures Pursuant to section 195(a), startup expenditures are not generally deductible .

Section 195 governs the deductibility of startup expenses, providing in pertinent part that the taxpayer\must capitalize the expenditures and "Except as otherwise provided in this section, no deduction shall be allowed for start-up expenditures ." Sec .

195 applies as so amended to amounts paid or incurred after Oct .

OPINION The relevant portion of section 195, as amended, provides: SEC.

Petitioner asserts that section 195 and its application to corporate acquisitions support its position.

521 (10th Cir. 1989); Goodwin v. Commissioner, 75 T.C. 424, 433 (1980), affd. without published opinion 691 F.2d 490 (3d Cir. 1982); McManus v. Commissioner, T.C. Memo. 1987-457, affd. without published opinion 865 F.2d 255 (4th Cir. 1988); see also sec. 195.9 Section 162 does not allow deductions for otherwise deductible expenses until such time as the trade or business begins to function as a going concern even though the taxpayer may have made a firm decision to enter into business and has ex

at they are moot, irrelevant, or without merit. To reflect the foregoing, Decision will be entered for respondent. 4At trial the Court inquired ofrespondent's counsel whether petitioner might be entitled to a deduction for startup expenditures under sec. 195. Respondent correctly points out that petitioner has been allowed deductions for startup expenditures beyond the amounts allowed under sec. 195(b). Accordingly, sec. 195 is ofno assistance to petitioner.

If otherwise eligible, preopening expenses may be amortized under section 195 after a trade or business begins.

U.S. 68 (1965). Until that time, expenses related to that activity are not “ordinary and necessary” expenses currently deductible under section 162 (or under section 212) but, rather, are classified as “start-up” or “pre-opening” expenses subject to section 195. Hardy v. Commissioner, 93 T.C. at 687-688, 691-692. “Carrying on a trade or business” requires a showing of more than initial research or investigation of business - 9 - [*9] potential, and the business operations must have actually begu

in business. Cabintaxi Corp. v. Commissioner, 63 F.3d 614, 620-621 (7th Cir. 1995), aff’g in part, rev’g in part, and remanding T.C. Memo. 1994-316. Before crossing the threshold of carrying on a trade or business, the taxpayer is in the province of section 195. See Weaver v. Commissioner, at *5 (“Implicit in the foregoing definitions is the concept that a taxpayer must in fact be ‘carrying on’ a trade or business for expenditures to be deductible under section 162. This limitation is made expli

rees from the property, we found that, during the year in issue, he had not commenced an active business on the property. - 16 - [*16] Id. at *12. We allowed no deduction for what we described as "'start-up expenditures'[,] * * * clearly covered by section 195". Id. at *11; see also Heinbockel v. Commissioner, T.C. Memo. 2013-125. Beginning in 2007 and through the years in issue, Ms. Legarcie's farming activities never moved beyond initial experimentation and investigation into an operating busi

re for producing and selling maple syrup and blueberries are deductible under section 162 as expenses ofa trade or business (or section 212 as expenses ofan income-producing activity), or, as respondent contends, nondeductible startup expenses under section 195. A. Startup Expenditures Petitioner contends that he was cultivating (in this case, thinning) the maple bush during 2012 and 2013 and that his expenses in 2012 and 2013 were deductible under section 162 or 212 and were not startup expense

Respondent maintains, however, that these expenses are startup expenses and therefore not currently deductible under section 195 but must be capitalized and deducted as provided in section 195(b).

195; see also Richmond Television Corp. v. United States, 345 F.2d 901, 907 (4th Cir. 1965), vacated and remanded on other issues, 382 U.S. 68 (1965). Abandonment Section 165(a) allows as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise. In the case ofan individual, the deduction is allow

never carried on an active trade or business. He argues that they should therefore "not be allowed any deductions related to their Schedule F for the years 2005, 2006, and 2007," and all ofthe expenses should be capitalized as startup expenses under section 195. Since the Heinbockels never entered production, the Commissioner -41- [*41] argues, the costs associated with preparing the land for production should be added to basis when computing gain or loss on the land. The colloquy we had at tria

Regulations promulgated under section 195 provide the time and manner for making such an - 14 - election.

2 The issue the Court must decide is whether $15,892 in "other expenses" that petitioners listed on a Schedule C, Profit or Loss From Business, attached to their 2001 tax return are "start-up expenditures" as defined by section 195, resulting in the disallowance of deductions claimed for those expenditures .

return a Schedule C, Profit or Loss From Business, for “Shrike Cars”. The Schedule C reflected a net loss of $448,120, which respondent disallowed on grounds that the costs associated with Shrike Cars were startup expenditures within the meaning of sec. 195, I.R.C. Held: Petitioners are not entitled to reduce their 1998 gross income by the $448,120 claimed net loss derived from the Shrike Cars enterprise. Held, further, petitioners are liable for the sec. 6651(a)(1), I.R.C., addition to tax for

After concessions, the issues presented for decision by the parties’ motions are: (1) Whether petitioner’s expenditures related to his tree farm activities are startup expenses that are not currently deductible under section 195; and (2) if the expenses are not startup expenses, whether petitioner was engaged in an activity for profit within the meaning of section 183.2 We sustain respondent’s determination that petitioner’s “trees” expenses were startup expenses and not currently deductible.

Commissioner, 93 T.C. 684, 687-693 (1989). 10On brief, respondent concedes that, if and to the extent petitioners’ claimed 1992 and 1993 Schedule C expenses are substantiated, 25 percent of such “Schedule C expenses” are allocable to the portion of the 5401-9 S. Broadway building used by petitioner for rental purposes and may be

Held, further, H does not qualify for relief under sec. 6015(b), I.R.C., but he qualifies for limitation of liability under sec. 6015(c), I.R.C., to the extent stated herein. Held, further, We have jurisdiction to review whether relief is available under sec. 6015(f), I.R.C. Fredie Lynn Charlton, pro se. Sarah K. Hawthorne, pro se.

We agree with respondent. - 10 - The evidence does not establish that the $63,500 payment relating to the so-called consulting services represented an ordinary and necessary business expense for Haas or for Haas & Associates. See Rule 142(a). Haas was an experienced accountant and had good relationships with the clients. The credible evi

The second issue for decision is whether petitioner is entitled to a medical expense deduction for amounts claimed for his special diet. - 5 - On a Schedule A attached to his 1992 return, petitioner claimed medical expenses in the total amount of $7,960. In the statutory notice of deficiency, respondent disallowed any deduction for $2,69

Startup Expenses Section 195 provides generally that no deduction shall be allowed for startup expenditures; however, such expenses, at the election of the taxpayer, may be treated as deferred expenses and allowed as a deduction prorated equally over a period of not less than 60 months as may be selected by the taxpayer beginning with the month in which the active

any attempt to contact service people to substantiate petitioners' claimed deductions. Furthermore, some of petitioners' claimed repair and maintenance expenses appear to - 15 - be startup expenditures which would not be currently deductible under section 195. Petitioners have failed to offer any reasonable evidentiary basis by which this Court could make a close approximation or estimate of petitioners' claimed deductions. We find that any attempt on the part of this Court to estimate petition

any attempt to contact service people to substantiate petitioners' claimed deductions. Furthermore, some of petitioners' claimed repair and maintenance expenses appear to - 15 - be startup expenditures which would not be currently deductible under section 195. Petitioners have failed to offer any reasonable evidentiary basis by which this Court could make a close approximation or estimate of petitioners' claimed deductions. We find that any attempt on the part of this Court to estimate petition

Ancient Artifacts Business Respondent determined that the claimed deductions for petitioner's ancient artifacts activities were startup expenses pursuant to section 195 and therefore not deductible since they were not related to an active trade or business.

carried forward as a theft loss, a casualty loss, or a trade or business loss. Petitioners have not suggested, and we have not found, any other ordinary loss that could be carried from 1983 to the years before the Court.14 14 Neither side discusses sec. 195, relating to deductibility of startup expenditures. Laney’s testimony about his pre-1983 notions of proper accounting procedures, his promises to clarify matters later in the trial, and his brief (continued...) - 41 - Respondent concedes tha

Upon examination, respondent disallowed petitioners' claims for amortization deductions, asserting that petitioners had failed to make a timely election to amortize the startup expenditures under - 7 - section 195, and that petitioners had failed to adequately substantiate the claimed expenditures.

Alternatively, respondent determined that, if petitioner's activity did constitute a trade or business, the expenses represented startup expenses that should have been capitalized under section 195 pursuant to an appropriate election by petitioners.

§ 195; Toth v. Commissioner, 128 T.C. 1, 4 (2007). Taxpayers bear the burden of proving that the expenses were connected with an operational business and were substantiated. Rule 142(a); see Welch v. Helvering, 290 U.S. at 115. Petitioners assert that the Golden Star Filling Station was an operational business in 2020, but respondent contend

Alternatively, respondent questioned whether petitioner’s travel expenses during the years in issue involved starting a new business and asserted the expenses should be categorized as startup expenses under section 195.5 Although petitioner provided some evidence to corroborate amounts of expenses, dates of travel, and destinations, he did not provide sufficient evidence to corroborate his business reasons for travel.

The other issues for decision are (1) whether petitioner engaged in a business activity with the objective of making a profit within the meaning of section 183; (2) whether petitioner incurred startup expenses that were required to be capitalized under section 195; and (3) whether petitioner is entitled to deduct home office expenses of $12,840 for each taxable year 2011 and 2012.

Petitioner has not shown how these payments were ordinary and necessary payments for services rendered related to his Schedule C business. Respondent’s determination is sustained, and petitioner’s 2008 and 2009 costs of goods sold are disallowed in full. B. Other Expenses Deduction for Tax Year 2008 The “Other Expenses” in dispute all rel

admit that the 68 Camaro was not raced or ready for racing until 2014. Expenses paid in 2013 with respect to the 68 Camaro would be deductible, if at all, through depreciation or as startup expenses under section 709 (applicable to partnerships) or section 195. If the expenses were properly classified as startup expenses, they would become deductible only for the year in which the business actually began, and the amount of the deduction would be limited to no more than $5,000. See secs. 709(b)(

admit that the 68 Camaro was not raced or ready for racing until 2014. Expenses paid in 2013 with respect to the 68 Camaro would be deductible, if at all, through depreciation or as startup expenses under section 709 (applicable to partnerships) or section 195. If the expenses were properly classified as startup expenses, they would become deductible only for the year in which the business actually began, and the amount of the deduction would be limited to no more than $5,000. See secs. 709(b)(

d this Court, and a trial was held in Miami, Florida. - 7 - Discussion I. Burden ofProof Respondent argues that petitioner is not entitled to the deductions at issue on his 2014 return because the underlying expenditures were startup expenses under section 195. Respondent also contends that petitioner failed to substantiate the expenses at issue. In general, the Commissioner's determinations set forth in a notice of deficiency are presumed correct, and the taxpayerbears the burden ofshowing that

Section 195 generally requires that a taxpayer either capitalize or amortize the start-up expenses ofa business. ATOB was formed in August 2007 and didn't open its doors until March 2008, but the Commissioner did not disallow the Browns' claimed 2007 expenses on this ground. This means the Browns weren't put on notice that they might have been able

es may, however, qualify as "startup" or "pre-opening" expenses, which become deductible over time only after the active trade or business commences. Heinbockel, T.C. Memo. 2013-125, at *43 (citing Hardy v. Commissioner, 93 T.C. 684, 687 (1989), and section 195). - 30 - [*30] Without a horse, Ms. McMillan was like the vineless vintner in Heinbockel, at *44; the treeless tree farmer in McKelvey, 2002 WL 341044, at *3-*4; the developmentless developer in Christian, 1995 WL 9151, at *4-*5; and the

t University. Petitioner worked as a data scientist for eBay, Inc., from 2011 to 2015. ¹ At trial respondent argued that petitioner's 2013 deductions claimed on Schedule C, Profit or Loss From Business, should be disallowed as startup expenses under sec. 195. However, neither ofthe two notices ofdeficiency mentions sec. 195, and respondent failed to make these arguments in his answer or on brief. Accordingly, we consider this issue conceded. See Mendes v. Commissioner, 121 T.C. 308, 312-313 (200

she was working to secure the proper operating licenses and satisfy other preliminary operating requirements. At trial respondent additionally argued that on the basis of Richmond Television Corp. v. United States, 345 F.2d 901 (4th Cir. 1965), and sec. 195, because MD Choice was not a going concern and not performing any (continued...) - 10 - [*10] III. Accuracy-Related Penalty Under Section 6662(a) We now address whether petitioner is liable for the section 6662(a) accuracy-related penalty. V

deduction ofordinary and necessary expenses paid or incurred in carrying on a trade or business. However, taxpayers must ¹6Respondent argues for the first time on briefthat certain ofthese expenses constitute nondeductible startup expenditures under sec. 195. This issue represents a new matter which would require the presentation ofdifferent evidence. See Rule 142(a); Shea v. Commissioner, 112 T.C. 183, 197 (1999). Since this issue was raised for the first time after the evidentiary record was c

195; see also sec. 1.195-1, Income Tax Regs. Barnes does not disagree.6 On her second Schedule C for 2009, Barnes reported income for this business of$10,000 and expenses of$10,570. In the stipulation ofsettled issues, the parties stipulated that, "in settlement ofthe adjustments in the respondent's notice ofdeficiency", Barnes is allowed to d

Commissioner, 93 T.C. at 687-693. Whether a taxpayer is engaged in a trade or business for purposes ofsection 162(a) depends on the facts and circumstances ofeach case. Woody v. Commissioner, T.C. Memo. 2009-93. The Court has focused on the following three factors when making this determination: (1) whether the taxpayer undertook

but rather are 'start-up' or 'pre-opening' expenses." Woody v. Commissioner, T.C. Memo. 2009-93 (citing Hardy v. Commissioner, 93 T.C. at 687-688). Startup expenses, although not currently deductible, may generally be deducted over time pursuantto section 195. Id. Whether a taxpayer's activities constitute the carrying on ofa trade or business requires an examination ofthe facts and circumstances ofeach case. Id.; see also Commissioner v. Groetzinger, 480 U.S. 23, 36 (1987). The Court has focus

, - 12 - paid the expense during the taxable year, see secs. 1.446-1(c)(1)(i), 1.461-1(a)(1), Income Tax Regs., and payment must be made in cash or its equivalent, see Davison v. Commissioner, 107 T.C. 35, 41 (1996), aff'd, 141 F.3d 403 (2d Cir. 1998).8 · . . Petitioners did not demonstrate that they·paid any expenses, such as tuition or

never carried on an active trade or business. He argues that they should therefore "not be allowed any deductions related to their Schedule F for the years 2005, 2006, and 2007," and all ofthe expenses should be capitalized as startup expenses under section 195. Since the Heinbockels never entered production, the Commissioner -41- [*41] argues, the costs associated with preparing the land for production should be added to basis when computing gain or loss on the land. The colloquy we had at tria

e or business, the taxpayer may elect to amortize startup expenditures. Beöauseipetitioner has not shown that his trade or business actually commenced in 2006, he is not entitled to deduct hor begin amortizing any portion of- his 2006 expenses under sec. 195. attributable.to (1) negligence or disregard :of rules or regulations,or (2) a rsubstantial understatement of±income tax. Negligence "includes any failure to make a reasonable attempt to comply with the provisions ofs this title",. and disre

The Commissioner contends in the alternativ that the expenditures either were start- up expenses under section 195 or were expenditures for the creation ofa capital asset (i.e., the Bailey Bullet).

The Commissioner contends in the alternativ that the expenditures either were start- up expenses under section 195 or were expenditures for the creation ofa capital asset (i.e., the Bailey Bullet).

profit; thus he could not amortize his expenses as.section 195 startup expenses.

ayers are allowed to deduct business expenses incurred in carrying on a trade or business, sec. 162, depreciation expenses for tangible personal property used in a trade or business, sec. 167, and startup expenses for an "active trade or business", sec. 195. The taxpayer must be carrying on or engaged in a trade or business at the time of the expenditure to be eligible for the deduction. See Weaver v. Commissioner, T.C. Memo. 2004-108. In contrast, only a passive trade or business is required fo

ayers are allowed to deduct business expenses incurred in carrying on a trade or business, sec. 162, depreciation expenses for tangible personal property used in a trade or business, sec. 167, and startup expenses for an “active trade or business”, sec. 195. The taxpayer must be carrying on or engaged in a trade or business at the time of the expenditure to be eligible for the deduction. See Weaver v. Commissioner, T.C. Memo. 2004-108. In contrast, only a passive trade or business is required fo

Section 195, in effect for the years .at issue, provides that no deduction shall be allowed for startup expenditures, except that a taxpayer may elect to treat such expenditures as deferred expenses deductible over a period of not less than 60 months, beginning with the month in which. the active trade or business 6Petitioner argues that 1 year of

Respondent alleges that petitioner's 2005 expenditures were startup expenditures and therefore subject to the limitations of section 195 .5 In the alternative, respondent contends that petitioner failed to conduct his activities with a profi t 5Respondent did not contest that Edokan was operating as a going concern in 2005 .

183 and that the expenses in issue were not startup expenses as defined in sec.

rovided only self-serving testimo y that he is entitled to the deductions . In addition responder contends that the i ite d documentation introduced into evidence appears to reflect the payment of startup expenditures that axe not deductibld, under section 195 . Section 195(a) provides that, exc pt as otherwise provided therein, no deduction is allowed for startup expenditures . See also Hardy v . Commissioner, 93 T .C. 684, 687-693 (1989), affd . in part and remanded in part per order (10th Cir

. Hardy v . Commissioner , supra at 687- 688 .""Start-up expenditures"--i .e . :, expenses incurred "before the day on which-. the active trade or business begins,i 6 sec . 195(c),(.1)(A)(iii) (emphasis added)--may be deducted only over time under section 195 . ' While all of Mr . Woody's 2004(cid:127) expenditures at issue have been substantiated, the question for decision before the Court . is whether they qualify as section 162 business expenses . . It is respondent's position that even. tho

is possible that some of petitioner's expenses may qualif as startup expenditures deductible under section 195, there is no evidence in the record that petitioner began a trade or b siness during the years at issue .

at 1000, classifies as an expense eligible for amortization as a startup expenditure under section 195 (and, in the context of a business expansion, as a deductible expense) "investigatory costs" that are "paid or incurred in order to determine whether to enter a new business and which new business to enter".

at 1000, classifies as an expense eligible for amortization as a startup expenditure under section 195 (and, in the context of a business expansion, as a deductible expense) “investigatory costs” that are “paid or incurred in order to determine whether to enter a new business and which new business to enter”.

Petitioner’s car expenses also were not deductible because petitioner failed to satisfy the substantiation requirement of sec. 274(d). - 16 - The Commissioner will not process an offer-in-compromise where the information provided is insufficient to allow the Commissioner to evaluate its acceptability. Sec. 301.7122- 1(d)(2), Proced. & Ad

We also talked to him about having him work on cases that we thought we could sue her prior employer. So we gave him stipends and he deducted every time we called him or what have you. Business startup expenses are deductible only as permitted under section 195. Investment expenses and advice concerning taxes are deductible under section 212, but only to the extent that the aggregate of miscellaneous itemized deductions exceeds 2 percent of adjusted gross income. Sec. 67(a). Legal fees relating

enter a new business and which new business to enter (other than costs incurred to acquire capital assets that are used in the search or investigation) qualify as investigatory costs that are eligible for amortization as start-up expenditures under § 195. However, expenditures incurred in the attempt to acquire a specific business do not qualify as start-up expenditures because they are acquisition costs under § 263. The nature of the cost must be analyzed based on all the facts and circumstanc

enter a new business and which new business to enter (other than costs incurred to acquire capital assets that are used in the search or investigation) qualify as investigatory costs that are eligible for amortization as start-up expenditures under § 195. However, expenditures incurred in the attempt to acquire a specific business do not qualify as start-up expenditures because they are acquisition costs under § 263. The nature of the cost must be analyzed based on all the facts and circumstanc

enter a new business and which new business to enter (other than costs incurred to acquire capital assets that are used in the search or investigation) qualify as investigatory costs that are eligible for amortization as start-up expenditures under § 195. However, expenditures incurred in the attempt to acquire a specific business do not qualify as start-up expenditures because they are acquisition costs under § 263. The nature of the cost must be analyzed based on all the facts and circumstanc

195; Madison Gas & Elec. Co. v. Commissioner, 72 T.C. 521 (1979), affd. 633 F.2d 512 (7th Cir. 1980); Frank v. Commissioner, 20 T.C. 511 (1953). - 16 - and use of Russian airplanes. In addition, no party has contended that Quotum’s corporate existence must be disregarded. Although we have found that James transferred substantial funds to or o

195; Madison Gas & Elec. Co. v. Commissioner, 72 T.C. 521 (1979), affd. 633 F.2d 512 (7th Cir. 1980); Frank v. Commissioner, 20 T.C. 511 (1953). - 16 - and use of Russian airplanes. In addition, no party has contended that Quotum’s corporate existence must be disregarded. Although we have found that James transferred substantial funds to or o

xpense 3(...continued) not deductible as a current expense. - 6 - deductions, may be deducted in the year the taxpayer's business ceases to operate); see generally sec. 336 (corporate taxpayer entitled to recognize loss in the year of liquidation); sec. 195 (allowing a taxpayer to deduct the unamortized portion of deferred startup expenditures for the year in which the trade or business is completely disposed of). Here, respondent does not contend that the cost of the Policy is not a necessary e

in effect for the years in issue. 2 The parties have stipulated that (1) petitioner paid or incurred all the expenses reported on his Schedule C for each of the years in issue, (2) these expenses are not “start-up expenditures” within the meaning of sec. 195, and (3) if the Court holds that petitioner’s videotape activity constituted a trade or business, then all these expenses are deductible. -3- FINDINGS OF FACT Some of the facts have been stipulated; the stipulations and the stipulated exhibi

through exhaustion deductions or as ordinary and necessary expense deductions may be deducted in the year the taxpayer’s business ceases to operate. See generally sec. 336 (corporate taxpayer entitled to recognize loss in the year of liquidation); sec. 195 (allowing a taxpayer to deduct the unamortized portion of deferred startup expenditures for the year in which the trade or business is completely disposed of). Here, respondent does not contend that the cost of the policy is not a necessary e

Upon examination, respondent disallowed petitioners' claims for amortization deductions, asserting that petitioners had failed to make a timely election to amortize the startup expenditures under - 7 - section 195, and that petitioners had failed to adequately substantiate the claimed expenditures.

195; Garrett v. Commissioner, T.C. Memo. 1997-231. C. Insurance Expenses Respondent disallowed the claimed insurance expenses on the basis that petitioner failed to substantiate the business purpose of the deduction. Petitioner claims the insurance expenses related to his automobile insurance; respondent, on the other hand, asserts petitioner

ithin the meaning of section 183 and disallowed the loss for 1991. In the alternative, respondent determined that, if petitioner was engaged in his golfing activity for profit, then the expenses incurred by petitioner constitute start-up costs under section 195. - 5 - Section 183(a) provides generally that, if an activity is not engaged in for profit, no deduction attributable to such activity shall be allowed. Section 183(b)(1), however, provides that deductions that are allowable without regar

Respondent argues that petitioner's expenses, other than those conceded by respondent, are start-up expenses paid in connection with a trade or business, and may be deductible under section 195 if and when he begins to operate his apartment building as a business.