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Start-up Expenditures and Organizational Expenditures

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This IRS has issued final, temporary (T.D. 9411), and proposed (REG-164965-04) regulations relating to elections to deduct start-up expenditures under Section 195, organizational expenditures of corporations under Section 248, and organizational expenses of partnerships under Section 709. The “American Jobs Creation Act of 2004” provides similar rules for deducting these types of expenses paid or incurred after October 22, 2004, and the regs are updated. The regulations also provide that taxpayers are no longer required to file a separate election statement to deduct costs under Sections 195, 248, and 709.

The temporary regulations under Sections 195, 248, and 709 apply to expenditures paid or incurred after September 8, 2008. However, taxpayers may apply all the provisions of these regulations to expenditures paid or incurred under Sections 195, 248, and 709 after October 22, 2004, provided the period of limitations on assessment of tax has not expired for the year the election under Section 195, 248, or 709 is deemed made. Expenditures paid or incurred on or before October 22 2004, may be amortized over a period of not less than 60 months under prior law.

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