{ "media_type": "text", "post_content": "Hi, all the tax professionals here. I have a question. My client started a business to develop a new formula in year 2013. The business failed and my client decided to abandon the business in year 2019. During year 2013 and 2018, no loss or expenses were claimed on the return. Can he claim all the loss/ expenses on year 2019 return. If yes, what the tax code or regulation can apply to this case? I appreciate your insights.\n", "post_id": "614c94c8cd5461002b153a8f", "reply_count": 10, "vote_count": 1, "bowl_id": "599555b669a73a0010aab3ac", "bowl_name": "Tax Bowl" }

Hi, all the tax professionals here. I have a question. My client started a business to develop a new formula in year 2013. The business failed and my client decided to abandon the business in year 2019. During year 2013 and 2018, no loss or expenses were claimed on the return. Can he claim all the loss/ expenses on year 2019 return. If yes, what the tax code or regulation can apply to this case? I appreciate your insights.

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Depends on if the business is active or not. Did his formula get patented and he was able to sell/license it? He can possibly claim start up costs but not if if the business not active. Tax court case in June came out that disallowed this. Anthony Provitola vs. commissioner

Thank you so much. I guess that’s the only way

Please clarify, Fish Bowl indicates you work at “Department of Revenue” and you are asking questions about a 2019 return that should have been filed. Who are you really? How do you have clients if you work for a department of Revenue? If this is legit, did your client file his 2019 and earlier returns?

Does it really matter who I am? To feed your curiosity, yes, I work for “some state” department of revenue. My account has been verified and it’s legit. FYI, a lot of people file late return as long as they are willing to pay interest and penalty.

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Assuming he filed returns in those years, he can only get a refund for three years' worth of returns. The 2013 tax year would have closed April 15th, 2017 (or October 15, 2017, if he filed an extension for 2013.)

Thank you so much. I was wondering whether can treat the losses/ expenses as capital expenses. I read a article online states that "Under regular tax rules, R&D costs are capital expenses and aren't deductible until the research project is abandoned or deemed worthless." If this is the case, he will be able to claim all the losses in the year he abandoned the business. But I haven’t found any IRS code or publication or any court case to back it up. Any idea?

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