26 U.S.C. § 195 : US Code - Section 195: Start-up expenditures

Search 26 U.S.C. § 195 : US Code - Section 195: Start-up expenditures

(a) Capitalization of expenditures
Except as otherwise provided in this section, no deduction shall
be allowed for start-up expenditures.
(b) Election to deduct
(1) Allowance of deduction
If a taxpayer elects the application of this subsection with
respect to any start-up expenditures -
(A) the taxpayer shall be allowed a deduction for the taxable
year in which the active trade or business begins in an amount
equal to the lesser of -
(i) the amount of start-up expenditures with respect to the
active trade or business, or
(ii) $5,000, reduced (but not below zero) by the amount by
which such start-up expenditures exceed $50,000, and
(B) the remainder of such start-up expenditures shall be
allowed as a deduction ratably over the 180-month period
beginning with the month in which the active trade or business
begins.
(2) Dispositions before close of amortization period
In any case in which a trade or business is completely disposed
of by the taxpayer before the end of the period to which
paragraph (1) applies, any deferred expenses attributable to such
trade or business which were not allowed as a deduction by reason
of this section may be deducted to the extent allowable under
section 165.
(c) Definitions
For purposes of this section -
(1) Start-up expenditures
The term "start-up expenditure" means any amount -
(A) paid or incurred in connection with -
(i) investigating the creation or acquisition of an active
trade or business, or
(ii) creating an active trade or business, or
(iii) any activity engaged in for profit and for the
production of income before the day on which the active trade
or business begins, in anticipation of such activity becoming
an active trade or business, and
(B) which, if paid or incurred in connection with the
operation of an existing active trade or business (in the same
field as the trade or business referred to in subparagraph
(A)), would be allowable as a deduction for the taxable year in
which paid or incurred.
The term "start-up expenditure" does not include any amount with
respect to which a deduction is allowable under section 163(a),
164, or 174.
(2) Beginning of trade or business
(A) In general
Except as provided in subparagraph (B), the determination of
when an active trade or business begins shall be made in
accordance with such regulations as the Secretary may
prescribe.
(B) Acquired trade or business
An acquired active trade or business shall be treated as
beginning when the taxpayer acquires it.
(d) Election
(1) Time for making election
An election under subsection (b) shall be made not later than
the time prescribed by law for filing the return for the taxable
year in which the trade or business begins (including extensions
thereof).
(2) Scope of election
The period selected under subsection (b) shall be adhered to in
computing taxable income for the taxable year for which the
election is made and all subsequent taxable years.