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Lights

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The business start-up costs are typically considered capital expenditures. That is, they are part of an investment in the business assets, and investment costs are amortized (spread out) over several years. Since the client is the sole shareholder, the start-up costs he or she can deduct in your first year of operation (generally up to $5,000) are reported in Part V - Other Expenses on Schedule C - Profit or Loss from Business. To claim a deduction for amortization of the balance of your start-up costs, you need to file Form 4562 - Depreciation and Amortization. The amortization of business start-up costs and the costs of organizing a corporation or partnership is reported in Part VI of Form 4562.
The court case I researched was SHANNON L. FERNANDEZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent. The case was about Petitioner failed to report income of $11,691 from the Los Angeles County Employees Retirement Association received on account of a divorce agreement, treated like a qualified domestic relations order, awarding her a portion of her former husband’s disability pay. Petitioner argues that either: (1) the $11,691 is excluded from her income under I.R.C. sec. 104(a)(1) because I.R.C. sec. 402(e)(1)(A) provides that an alternate payee, pursuant to I.R.C. sec. 414(p), who is the former spouse of the participant shall be treated as the distribute of any distribution or payment made to the alternate payee under a qualified domestic relations order, or (2) she steps into the shoes of her former spouse and therefore should receive the same tax treatment on the payments.
Thanks,

Seanchievlee Laos Ngam

Reference
Retrieved on December 12, 2013 from http://www.irs.gov/publications/p535/ch08.html http://www.ustaxcourt.gov/InOpHistoric/fernandez2.TC.WPD.pdf SHANNON L. FERNANDEZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

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