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Business commencement costs

  • 1.  Business commencement costs

    Platinum Most Valuable Member
    Posted 19 days ago
    a NY taxpayer is an organizer of a business he is starting up in Tx.. It will be an LLC
    he flys to Texas, makes 3 trips and spends money for the airfare, hotel, meals and other costs for the business , , while in Texas  he leased premises and other  hard and soft costs such as hiring an engineering frim to draw plans for a build out.

    How should i handle the costs for his travel, over night hotel and meals. ?
    non deductible,
    could they be a partner's un - reimbursed partnership  Exp  -  on sch "E"
    or would they be capital in nature, and simply part of basis ?

    how would they be handled if the partnership reimbursed him ?

    These efforts are resulting in a daycare center opening.


    All comments appreciated.


    Abby



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    Abby Alhante
    KURCIAS & ALHANTE, CPAs LLC
    Melville NY
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  • 2.  RE: Business commencement costs

    Posted 2 days ago
    @Abby Alhante
    Hi Abby:
    It sounds like you have some classic organization costs and start up costs.  Those are capitalized until the business begins its operations.  At that point  you will have decisions to make in terms of whether the amounts can be expensed or if they exceed the limits, whether they are amortized over 180 months on a straight line basis.​

    So it sounds as if the LLC will be treated as a partnership for tax purposes.  Those expenses could be capital contributions by the partner or loans from the partner to be later reimbursed and repaid by the partnership and the costs borne by all partners in the deal.  Since it doesn't sound like the partnership has begun business yet, they wouldn't be expensed at that point.  Later expenses by the partner after operations have begun could potentially be deducted on the Sch E IF the partnership agreement has a specific provision that dictates what expenses might be incurred by a partner on behalf of the partnership and would not be reimbursed by the partnership.

    I believe that addresses your questions.

    Steve Miller
    Dallas, TX

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    Steven Miller CPA
    STEVEN E. MILLER, CPA, PC
    Dallas TX
    214.361.1131
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  • 3.  RE: Business commencement costs

    Platinum Most Valuable Member
    Posted 2 days ago
    Hi Steve,


    thanks for commenting....
    perhaps you can lend some advice on texas taxation... the client is located in your great state.....
    i do not have a direct email to you . ,
    please write me

    Abbya@kurciasalhantecpas.com

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    Abby Alhante
    KURCIAS & ALHANTE, CPAs LLC
    Melville NY
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