Which of the following statements is correct in connection with the investigation of a business?
A) If the taxpayer is not already engaged in the trade or business, the expenses incurred are deductible if the project is abandoned.
B) Expenses may be deducted immediately by a taxpayer engaged in a similar trade or business regardless of whether the business being investigated is acquired.
C) That business must be related to the taxpayer's present business for any expense ever to be deductible.
D) Regardless of whether the taxpayer is already engaged in the trade or business, the expenses must be capitalized and amortized.
E) None of the above.

Question

Quizplus · Accepted Answer

According to IRS guidelines, a taxpayer engaged in a similar trade or business may immediately deduct expenses incurred while investigating or attempting to start a new business. The taxpayer does not necessarily have to acquire or start the business being investigated. Therefore, statement B is correct. The other statements are incorrect. Statement A is incorrect because regardless of whether the project is abandoned, expenses incurred are still not deductible for a taxpayer who is not already engaged in the trade or business. Statement C is incorrect because the business being investigated does not necessarily have to be related to the taxpayer's present business. Statement D is incorrect because expenses incurred by a taxpayer who is engaged in a similar trade or business can be immediately deducted and do not have to be capitalized and amortized.

Which of the Following Statements Is Correct in Connection with the Investigation