Purchasing an Active Trade or Business

Amortizeable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business.

These are the costs that help you decide whether to purchase a new business and which active business to purchase.

However, costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize.

For example, your attorney prepares a letter of intent and performs services after the letter is sent. The cost to prepare the letter and the cost of services performed after the letter is sent would be deductible as a capital loss because they are costs incurred in an attempt to purchase the business.

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