Considerations affecting the after-tax cost of business expansion

Expenditures made to expand an existing business activity are currently deductible. Alternatively, expenditures made to investigate a new business are deferred expenses that must be amortized under Section 195. Consequently, an immediate deduction is only available when a business can demonstrate th...

Full description

Saved in:
Bibliographic Details
Published inTaxes Vol. 81; no. 11; p. 37
Main Authors Alltizer, Richard L, Bryant, Jeffrey J
Format Trade Publication Article
LanguageEnglish
Published Riverwoods CCH INCORPORATED 01.11.2003
Subjects
Business growth
Capitalization
Corporate reorganization
Corporate tax planning
Costs
Expenditures
Federal court decisions
Internal Revenue Code
Investigations
Investments
Section 195
Section 263
Startups
Tax courts
Tax deductions
Taxpayers
United States > US
Online AccessGet full text

Cover

More Information
Summary:Expenditures made to expand an existing business activity are currently deductible. Alternatively, expenditures made to investigate a new business are deferred expenses that must be amortized under Section 195. Consequently, an immediate deduction is only available when a business can demonstrate that the activity under investigation is an extension of an existing activity. The extent to which expenditures are currently deductible as opposed to capitalized for tax purposes has long been a contentious issue between taxpayers and the government. The problem is particularly apparent when expenditures are made pursuant to expanding business activities. With proper structuring, though, the uncertainties and the after-tax cost of such expansion can be reduced.
ISSN:0040-0181