Tax Court halts start-up cost deductions in new case

January 7, 2022

Clients need to officially open for business before deducting any expenses as start-up costs, the Tax Court ruled in a recent case.

The case centered on a California taxpayer who purchased ten acres of remote desert property with the intent of developing its natural resources and renting parcels to farmers. The taxpayer began construction of an outdoor structure in 2015, a core component of his business plan.

He did not take any steps to show that the business was operational, however, and the court ruled he was not entitled to a deduction of $5,000 for start-up costs on his Schedule C that year. Read more.

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