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Start up Cost-New Business Venture

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    Start up Cost-New Business Venture

    I have a new client who has a regular full time job where she gets W2 but in 2019 she started a new business and created an LLC as sole proprietorship as real estate investor. Her plan was to buy and sell homes. With this new venture she paid for some expenses for educational workshops and have an invoice showing that she paid close to $30,000. That amount plus other business related start-up costs were deducted on her 2019 tax return on Schedule C. But due to Covid the business was paused during 2020.

    Now she received a letter where her 2019 tax return was audited and she provided all the receipts and the IRS now has denied the deduction. IRS states the education cost deduction is disallowed as it was not related to the current work as it is related to the new venture. I know the expenses were related to a new business venture, and not her existing W2 job and the client had intent to start the business as she created the LLC, took funds out of her 401K to pay off the workshops and did pay lien companies to study the market etc. Any suggestions on how to handle this with the IRS will be greatly appreciated or what to do in this situation.

    Also, today the client called and said that going forward she has no intention of investing in real estate.

    #2
    https://www.irs.gov/taxtopics/tc513#...tus%20or%20job.

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