
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC195]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 195. Start-up expenditures


(a) Capitalization of expenditures

    Except as otherwise provided in this section, no deduction shall be 
allowed for start-up expenditures.

(b) Election to amortize

                           (1) In general

        Start-up expenditures may, at the election of the taxpayer, be 
    treated as deferred expenses. Such deferred expenses shall be 
    allowed as a deduction prorated equally over such period of not less 
    than 60 months as may be selected by the taxpayer (beginning with 
    the month in which the active trade or business begins).

        (2) Dispositions before close of amortization period

        In any case in which a trade or business is completely disposed 
    of by the taxpayer before the end of the period to which paragraph 
    (1) applies, any deferred expenses attributable to such trade or 
    business which were not allowed as a deduction by reason of this 
    section may be deducted to the extent allowable under section 165.

(c) Definitions

    For purposes of this section--

                      (1) Start-up expenditures

        The term ``start-up expenditure'' means any amount--
            (A) paid or incurred in connection with--
                (i) investigating the creation or acquisition of an 
            active trade or business, or
                (ii) creating an active trade or business, or
                (iii) any activity engaged in for profit and for the 
            production of income before the day on which the active 
            trade or business begins, in anticipation of such activity 
            becoming an active trade or business, and

            (B) which, if paid or incurred in connection with the 
        operation of an existing active trade or business (in the same 
        field as the trade or business referred to in subparagraph (A)), 
        would be allowable as a deduction for the taxable year in which 
        paid or incurred.

    The term ``start-up expenditure'' does not include any amount with 
    respect to which a deduction is allowable under section 163(a), 164, 
    or 174.

                 (2) Beginning of trade or business

        (A) In general

            Except as provided in subparagraph (B), the determination of 
        when an active trade or business begins shall be made in 
        accordance with such regulations as the Secretary may prescribe.

        (B) Acquired trade or business

            An acquired active trade or business shall be treated as 
        beginning when the taxpayer acquires it.

(d) Election

                    (1) Time for making election

        An election under subsection (b) shall be made not later than 
    the time prescribed by law for filing the return for the taxable 
    year in which the trade or business begins (including extensions 
    thereof).

                        (2) Scope of election

        The period selected under subsection (b) shall be adhered to in 
    computing taxable income for the taxable year for which the election 
    is made and all subsequent taxable years.

(Added Pub. L. 96-605, title I, Sec. 102(a), Dec. 28, 1980, 94 Stat. 
3522; amended Pub. L. 98-369, div. A, title I, Sec. 94(a), July 18, 
1984, 98 Stat. 614.)


                               Amendments

    1984--Subsec. (a). Pub. L. 98-369 amended subsec. (a) generally, 
substituting provisions dealing with capitalization of expenditures for 
provisions dealing with election to amortize.
    Subsec. (b). Pub. L. 98-369 amended subsec. (b) generally, 
substituting provisions dealing with election to amortize for provisions 
dealing with start-up expenditures.
    Subsec. (c). Pub. L. 98-369 amended subsec. (c) generally, 
substituting provisions setting forth definitions for provisions dealing 
with election.
    Subsec. (d). Pub. L. 98-369 amended subsec. (d) generally, 
substituting provisions dealing with election for provisions dealing 
with business beginning.


                    Effective Date of 1984 Amendment

    Section 94(c) of Pub. L. 98-369 provided that: ``The amendments made 
by this section [amending this section] shall apply to taxable years 
beginning after June 30, 1984.''


                             Effective Date

    Section 102(c) of Pub. L. 96-605 provided that: ``The amendments 
made by this section [enacting this section] shall apply to amounts paid 
or incurred after July 29, 1980, in taxable years ending after such 
date.''

                  Section Referred to in Other Sections

    This section is referred to in sections 543, 1202 of this title.
