TP business never really took off

[AZ-Tax]

July 2010 TP purchased hot dog cart with the hopes to secure a location. Location didnt come thru so business failed within a matter of months.

Sch C business deduction OR Sch D investment gone bad. TP was "materially" participated.

[erchess]

I don't have a cite but here are my opinions

I think you could put the cart on Sch D and if that's the way the numbers work best go for it but remember only capital assets can go on Sch D. I would imagine he had expenses for things such as food and possibly costs trying to get or of securing some location, a business license, and so on. Any such would have to go on Sch C and the Cart and other capital assets could go on a depreciation schedule and be expensed under sec 179 if that gives the preferred result. If the expenses he had were for capital assets only, I don't know but what Sch D is the only allowable option.

I'm not sure I'm right and I hope that with a new ride to the top of the page this may see some more posts. Perhaps OP would care to give us more info about the nature of the expenses and whether the client had as I assume intended to operate as a Sole Proprietor or formed an entity of some kind.

[AZ-Tax]

TP intentions were to have a business

TP intentions was to have a business. I only got brief details that TP purchased a hot dog cart so I dont know if any food was purchased at wholesale to be then sold at retail plus other related exps. My major concern with this would the TP have to consider this a Hobby thus none of it be deductible since the business never really got off the ground. I was leaning more Sch C depending on if there are other exps in addition to purchasing the cart.

[Davc]

If he never purchased food then he obviously was never "open for business" and nothing goes on C. The costs would all be a capital loss. See TTB 8-19.

[solomon]

RR 99-23

[oceanlovin'ea]

did he sell cart?

My first thoughts were start up expenses. He had business intent.

Is he going to sell the cart? If he sells the cart, I would think it would be 4797 transaction.

Linda, EA

[Davc]

Only if the cart was "placed in service."