Client began business in 2021 and has income/expenses providing a professional service. Filing Sche C. Also, took training class to add (related) new feature to business, which has not yet been implemented. Can this training class be considered a start-up expense? It was paid for in 2021, but this feature won't be implemented until 2022. New feature involves selling of self-created materials and books.
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I don't think so.
If it is closely related to the business and considered as part of the same business, I would just view it as deductible educational expense.
If it is not close enough to the current business and considered as a new business, I suspect it is not deductible at all (education to start a new business is not deductible). -
It's definitely related, and it can be deductible as an educational expense. But it will create a loss, as it was nearly $7K, and TP doesn't need it. I would like to be able to use some of it in future years. Can it be capitalized?Comment
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To clarify further, this will provide a future benefit lasting over a period of years. It was not required to meet the minimum necessary requirements of the business, or licensing, etc.Comment
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Burke, of course you can capitalize the expense. The question becomes whether you can amortize it. Could you make an argument that the expense was similar to a website development, or a developed software, or a 3 year prepaid advertising contract? Something along those lines where you would have a period of 3 years and not the Sec197 15 years? Or even a prepaid insurance contract? I know I may be getting confused with book/tax differences here but if you capitalize it, how will you amortize it?Comment
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