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Old 01-09-2010, 10:37 PM
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Start Up Cost or Loss

I registered my new business - a nursery - at the end of July. During the next couple months I purchased plants and some equipment (pots, shelves). The plants will be ready for retail sale this spring. I didn't sell any plants in 2009, so I didn't earn a penny. Should this spending be considered as a Start Up Cost or Loss.
Thank you in advance.
Mimi



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Old 01-10-2010, 10:58 PM
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The cost of setting up the corporation can be considered as a Start Up Business expenses or Organization costs. This can be expensed upto $5,000 in 2009.

However, the Plants that were purchased are considered Inventory and cannot be expensed until sold. I would like to remind you that you would be reporting sales under the accrual method of accounting and hence cannot expense the cost of plants as they have not been sold in 2009!

But, with respect to the equipment and shelves, these can be expensed completely under s179 provision provided you have other taxable qualified income. But, if you don't have any other source of income, the equipment can be depreciated using the MACRS method over 7 years!

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Old 01-12-2010, 12:07 AM
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Thank you so much for the quick reply!
I beleive I have to use cash method of accounting, as I just started the business. Any advantages to use accrual method?
Thank you again.
Mimi



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