Amortization of start-up costs.

• Author: Davis, Jon E.
• Position: IRS regulations

The IRS just released final regulations, effective for elections filed on or after Dec. 17, 1998, providing rules and procedures for electing to amortize start-up expenditures under Sec. 195. Sec. 195 generally provides that no deduction is allowed for start-up expenditures unless a taxpayer elects to amortize them over a period of not less than 60 months, beginning with the month in which the active trade or business begins.

The taxpayer must attach the election statement to his income tax return. The election must be filed no later than the due date for the income tax return (including extensions) for the tax year in which the active trade or business begins. Thus, under the final regulations, a taxpayer may file an election in any tax year prior to the year in which his active trade or business begins; such election becomes effective in the month of the year in which the taxpayer's active trade or business begins.

A revised statement may include any start-up expenditures not included on the original election, but it may not include any expenditures for which the taxpayer had previously taken a position on a return inconsistent with their treatment as start-up expenditures (e.g., deducted as a period cost on the original tax return). The revised...