If you are planning to start or acquire a new business in 2007, I suggest you keep adequate records of the expenses you paid or incurred in creating the new business. These would include the following: Investigative costs including analysis of potential markets, labor force and financial projections.
Advertising for business opening.
Costs of training employees.
Consulting and other professional fees.
If the organization is a corporation or a partnership, expenses can include organizational meetings, state fees, legal and accounting fees related to setting up the entity.
If an election is made, and this is critical, up to $5,000 of start-up expenses may be deducted in the year your business begins. Any additional expenses would be deductible over a period of 180 months. Absent the election, start-up expenses must be capitalized. The $5,000 limit is reduced dollar-for-dollar once total start-up costs exceed $50,000.
Court decisions have generally defined the start date as the point when the business begins to function as a going concern and performs those activities for which it was organized.
For more information, you can visit the Internal Revenue Service website at www.irs.gov or you can contact me at 608-637-6898 or at marty@martymcevoy.com
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