Expense intangible

Page 642 J K laser's Your Income Tax 209.

This is for Schedule C.

"When you are planning to invest in a business, you may incur preliminary expenses for traveling to look at property and for legal or accounting advice. Expenses incurred during a general search or preliminary investigation of a business are not deductible, including expenses related to the decision whether or not to enter a transaction. Howwever, when you go beyond a general search and actually go into business you may elect to deduct or amortize your start-up costs.

Deductible or amortizeable start-u[p costs. Yopu can elect to deduct up to $5,000 of start up costs on Schedule C in the taxable year in which your self employed business begins. The $5,000 limit is reduced by the amount of start up expenses exceedong $50,000. Start up costs over the first year deduction limit may be amortized over 15 years. Start up costss incurred before October 23, 2004 are amortizeable over a period of not less than 60 months, beginning with the month the business begins (there is no $5,000 up front deduction allowed.) An election to amortize is made by claiming the deduction on form 4562, and it is then entered in Part V (:Other Expenses") of Schedule C.

Eligible costs include investigating and setting up the business, such as expenses of surveying potential markets, products, labor supply, and transportation facilities; travel, and other expenses incurred in lining up prosspecitive distributors, suppliers, or customers; salaries or fees paid to consultants or attorneys, and fees for similar professional services. The business may be one you acquire from someone else or a new business you create."

Business start-up expenditures Code Section 197.

Publication 535 has some explanation of Start-up Espenses. You would list them on an attachment to Part V line 48 of Schedule C.

The statement must declare that you are making an election under Section 195 of the tax code (not 197 as peterhawaii suggests) . It must also include all of the following:

1. a statement that you elect to deduct the first $5,000 of start-up expenses

2. a statement that you are electing to amortize the remaining expenses (if any) over 180 months beginning in the month business began, and

3. a list of your start-up expenses, including a description, dollar amount, and date for each expense incurred.

First, there is an election for start up expenses. Look in the list for the federal elections. Then, I prefer to add up my expenses that qualify for start up capitalization and SUBTRACT the expenses that are capitalized from the total. For example, if I am capping items that are in the "other deductions' section of a business return, I leave them in that section, but I enter a NEGATIVE AMOUNT as an "other deduction" so I don't lose any detail.

Say my total "other" is $26,533 of various types of expenses and I have to cap $15,000 of them. I enter a NEGATIVE $15,000, called "Start Up Expenses," then deduct $5,000 to get that amount(unless there is a "Sec 179-like expense on the depreciation w/s--I forget) . On the election form I put $15,000 and elect to deduct $5,000. THIS FORM DETAIL GOES NOWHERE ELSE, so you need to continue.

Then I have to put the $10,000 on a depreciation w/s so I can amortize them over 15 years, section 195.

If you go to the forms menu on the left side of the screen, you will find an IRC elections form towards the bottom of the menu. Clicking on the IRC elections form will get you to the elections worksheet.