Startup Costs for New Real Estate Business

[kamckinley]

I've researched and researched this and am still not sure of the answer... I hope someone here can help!

Teacher retires and wants to start a real estate business. He takes seminars to learn how to be a real estate agent. Incurs expenses in 2007, but no income yet (still no income in 2008).

Are the seminar expenses deductible as startup costs on 2007? 2008? Not at all? Or, deductible as education expenses elsewhere?

One last piece of info that may or may not help: he has several rental homes... could this possibly be deducted on Schedule E if doesn't qualify as startup costs?

Thanks in advance for any help...

[Bees Knees]

Education to learn a new trade or business is not deductible, even as start up costs.

You could, however, stretch the argument into qualifying for a rental expense deduction. Just say the seminars helped the landlord understand how he/she can be more profitable in the rental real estate business.

[kamckinley]

When to Write Off License Fees and Other "Legit" Startup Costs

Thanks for confirming what I thought about the seminar fees. I didn't think they were deductible, but wanted to make sure they didn't qualify as startup costs.

This client does have other legitimate startup costs, such as the real estate license fee, dues, etc.

Costs were incurred in 2007, but no income until 2008. Can he deduct as startup costs in 2007, or does he need to wait until he actually earns income?

Thanks again...

[equinecpa]

From IRS pub 535 "Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business."

The taxpayer can ELECT to deduct them in 2007.