Startup cost question. Incorporated in 2017 but opened in 2018

[bencoleman18]

we incorporated in 2017 and when we went to file for an FEIN we listed a start date in 2017.  Due to delays in outside our control, we did not open till 2018.  Are all the expenses in 2017 considered Start-up and organizational and to be capitalized?  Or go by start day on FEIN application and those expenses after that date are all operating expenses and the 2017 return will operate at a loss? (ignoring any capital expenditures as these are balance sheet itims)

[Carl]

When a corporation (S-Corp I presume?) is active and when it's "open for business" are two different things. How each is treated can also depend on the state you registered the business in, as state laws will apply and will affect how you file the federal corporate return.
I hope I'm wrong, but I get the impression that you have not yet filed a 2017 tax return for the corporation (still assuming it's an S-Corp too). If so, then be aware the corporate return was due on March 15 and the late fee is $125 per month, per owner of that S-Corp. So if my assumptions are even close to being right, you need to stop now, get with a CPA or tax attorney in your local jurisdiction and get the *facts* as applied by the laws of your state. Right now, if you are required to file a 2017 corporate return (and I bet you are) you've already incurred a $250 late filing fee just for you as a single owner of the corporation. Those fines, late fees and penalties are not a tax deduction either. There's going to be other fines and penalties also that are going to make the cost of professional help seem like a pittance in comparison. Please get with a professional ASAP, and I hope your business doesn't go under because of this, before it even has a chance to get off the ground.

[bencoleman18]

Carl normally I would agree!   I started on here to avoid seeing a tax attorney or CPA as I am myself a professional accountant/financial person for well over a decade.  The IRS is vague in their descriptions on what constitutes opening date and its vague in my research from other articles.   That means gray areas and wanted to get insight from other folks.   

The company is an elected s-corp company and the return is on extension, giving the client time.    

Start-up companies I have no done in a long time and am helping out a colleague and his company.  There is a greater cause and effect on how the books are set up from a financial side but then on the tax basis.   I am thinking ahead to how the single shareholder funnels money to the company by either loan or contribution and how its going to affect equity, AAA, and AE & P.

For the client the easiest scenarios is by way of loan, long term loans for the company to pay back but ultimately need to consider the tax repercussions.

[Carl]

You can always play it safe and file the 2017 1120-S. As I'm sure you're aware (and in case you just need a refresher) startup costs incurred prior to the business being open can be deducted in that first year up to a maximum of $5K. Then any remaining is Amortized (as opposed to capitalized) and deducted over the next 15 years. Now with the TurboTax program it's sometimes necessary to enter startup costs manually in the Assets section by selecting the asset class "other" and working it through manually. Usually though (but not always) when the program asks for startup costs it gets it right.
As I see it, the reason the IRS is vague on opening date, is because it's usually defined by the state. For example, here in FL where I live your S-Corp opening date is the date your business is "active" as indicated by the active date on the registration. I myself don't know anyone in this state who registers a business otherwise, myself.
In other states (and this is what I hear, not facts I've verified) the active business date must be identified in the articles of incorporation and can be after the registration date and doesn't have to be in the same tax year of registration.
But what I've seen most common on this forum regardless of state, is that folks have been told to consider the business active on the date of registration and file anyway. One of the reasons behind that is to avoid the possibility of finding out the hard and costly way that a return was supposed to be filed in the year of registration. That $125 per month per owner late filing fee can easily contribute quite a bit to bankrupting a new corporation before it even gets off the ground. I've also never heard of a corporation being fined or penalized for filing a return that was not needed.
@TaxGuyBill is much more versed on this S-Corp stuff than I am, and I'm sure if he has more to offer he'll jump in here.

[Rick19744]

This area is clearly not "defined" in any statute or regulation.

Active conduct of a trade or business occurs when the business has begun to function as a going concern and perform the activities for which it is organized. Thus, the question of when a taxpayer has begun the active conduct of a trade or business is a facts and circumstances determination that must be made on a case-by-case basis. Generally, the taxpayer must have begun to function as a going concern and perform the activities for which it was organized in order for the start-up period to end .

The date on the SS-4 in general will have no bearing on when the trade or business actually began.  This is an estimate only.  The IRS will look at the substance of the situation over the form.

Amortization of the Section 195 and 248 costs will run hand in hand.  Amortization for both begin as noted above.