26 U.S.C. § 248 — Organizational expenditures
submitted 72 years ago by ch. 736 to r/title-26-INTERNAL-REVENUE-CODE · 238 words · no verdicts yet
A corporation can choose to deduct its start-up costs instead of capitalizing them. It deducts up to $5,000 immediately, reduced for costs over $50,000, then spreads the rest over 180 months. The corporation must elect this by its tax return deadline for that year.
(a) Election to deduct: If a corporation* chooses (following Treasury regulations) to use this rule for its organizational expenditures, then: (1) for the year it starts business, it can deduct the smaller of its total organizational expenditures or $5,000 — but that $5,000 cap shrinks (never below zero) by however much the expenditures go over $50,000; and (2) whatever's left of those expenditures gets deducted evenly over the 180 months starting with the month the business begins.
(b) Organizational expenditures defined: "Organizational expenditures" means costs that are tied to creating the corporation, must be charged to capital account, and would be the kind of cost that could be spread out over the corporation's life if the corporation had a limited lifespan.
(c) Time for and scope of election: The corporation must make this choice by the deadline for filing its tax return for that year (including extensions). Once chosen, the corporation must use that same deduction period when figuring its taxable income for that year and every year after.
If a corporation* elects the application of this subsection (in accordance with regulations prescribed by the Secretary*) with respect to any organizational expenditures—
the corporation shall be allowed a deduction for the taxable year* in which the corporation begins business in an amount equal to the lesser of—
the amount of organizational expenditures with respect to the taxpayer*, or
$5,000, reduced (but not below zero) by the amount by which such organizational expenditures exceed $50,000, and
the remainder of such organizational expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the corporation begins business.
The term “organizational expenditures” means any expenditure which—
is incident to the creation of the corporation;
is chargeable to capital account; and
is of a character which, if expended incident to the creation of a corporation having a limited life, would be amortizable over such life.
The election provided by subsection (a) may be made for any taxable year but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). The period so elected shall be adhered to in computing the taxable income of the corporation for the taxable year for which the election is made and all subsequent taxable years.
Source credit: (Aug. 16, 1954, ch. 736, 68A Stat. 76; Pub. L. 94–455, title XIX, §§ 1901(a)(36), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1770, 1834; Pub. L. 108–357, title VIII, § 902(b), Oct. 22, 2004, 118 Stat. 1651; Pub. L. 113–295, div. A, title II, § 221(a)(42), Dec. 19, 2014, 128 Stat. 4044.)
- 1954Enacted · Act of Aug. 16, 1954, ch. 736
- 1976Amended · Pub. L. 94-455 · 90 Stat. 1770, 1834
- 2004Amended · Pub. L. 108-357 · 118 Stat. 1651
- 2014Amended · Pub. L. 113-295 · 128 Stat. 4044
A history note hasn’t been published yet. The record shows enactment by ch. 736 on 1954-08-16.
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