What year do you write off start-up business costs when some of the costs were paid for in 2016 and more costs and the decision to not open the business occurred in 2017?

[TaxGuyBill]

Are you saying the business never opened?

What type of costs were there?

Was this intended to be a Sole Proprietorship?  Or was it a corporation?

[swellborn50]

yes, the business never opened because we weren't able to raise all the capital.  The structure is a LLC - single member.  So filing as a sole proprietorship.  The costs were legal and marketing - establishing the brand, name, website, establishing the LLC, etc.

[TaxGuyBill · Accepted solution]

You can't deduct anything in 2016, but all of it will be deductible in 2017.

When doing your 2017 tax return next year, you will enter it as a business "Asset", then enter the sales price of $0.

[swellborn50]

Will this be on schedule C or schedule D? I saw another answer to a similar question that said to record as a capital loss - basically on Schedule D with a $3,000 loss limitation.

[TaxGuyBill]

Actually, I just had this discussion a couple of weeks ago with a bunch of tax professionals.  I had incorrectly thought it would be on Schedule D, but somebody else corrected me by posting PLR 8815022 which says it goes on Form 4797 (which means you enter it as an Asset on Schedule C).

[swellborn50]

Very helpful.  Thanks so much.