food real life start for income tax purposes the app's argued below and argued on this appeal that the business started for income tax purposes of the beginning of two thousand and nine the tax court below sa it did not start prior to two thousand and eleven and the tax court got it wrong the st issue i would like to discuss is the standard of review the jackson case in the th circuit which specifically dealt with a start up cost situation held that this issue is a mix question of law passed when you have a situation where  before the trial court are not really in dispute and the trial court drew inferences from the evidence in this and this this circus precedent which is a sham holmes case didn't involve the start up cost situation but it also affirms the fact that this is a situation where there is a next question a lawful act review do you know if you review the tax court's opinion ages and in my view this evidence just is not sufficient to pray that the taxpayers started their business prior to two thousand and eleven well i mean the tax court pointed to are a variety of facts that they december they looked at the stocks and found that the start up phase continued through two thousand and ten i mean i understand that your client's a view is that no others there's plenty of evidence that that rehearsal it's reversible because of the other evidence not mentioned by the tax court in its opinion it was in the record it was undisputed so for example schedule c for two thousand and nine there was a small amount of gross receipts sperry small but still there there was a product said unto you one thousand and ten schedule c there lies about three or four thousand in your client's favor or is it your argument that the fact that the tax court didn't mention that evidence in their opinion shows that they erred well i don't necessarily view as what example where that camera at seventy now saying oh i'm about ready to finalize the formula for the product this isn't two thousand and eight before the business started in the minds of the taxpayers they're there so there is activity before two thousand and eight is not a situation where all of a sudden two thousand and i we're going to start of this the contract with aig started effective january st product shipments started in early two thousand bottles of liquid from a g m and over three thousand seven hundred containers of powers you don't receive those unless you're trying to sell something you don't have gross receipts unless you're trying to sell something and cabin taxi which is authorities had no bearing on that and the reason for that is you can be doing more than one thing at once ok in other words we don't dispute that there was experimentation there was experimentation with the labels the that you know you couldn't put on a shelf or even have in the showroom if you have the ability to sell and the willingness to sell when you make efforts to promote your product that's all that's required you don't need a trademark you can you can have something that you items are concerned but the client that the apps were receiving product they were trying to sell you can try to sell a product without insurance you can try to sell a product without a trademark you can try to sell a product without a business accurately reporting what was on the application the words that were used there's no doubt there's no question the words were on the application yes and to me that does support the  evidence the other way but it just doesn't seem to me that the evidence that you've suggested compels under the tax law as a matter of law applying to business come earlier than when the commissioner argued on the tax court found well i understand your honour's position however i would respectfully submit that the case law says that if you can sell you have the ability supplements let me briefly then turn to the penalty this is a case where the outcome is reasonably debatable and under the surface of story that means there should be no penalty even  business before you have a you know rental property ready to rat before you before you have you're able to lease it out you have taste law that says authors who have not published a book have a trade or business before they've even gotten the contract they're drunk writing the book they're in a trade or business that is clearly and then the circuit there is no case law whatsoever and again the authorities say if it's and our legal argument is the ip he doesn't matter the chembur of late parties doesn't matter what matters is we have a contract we have the ability to import product we had it and there was an effort to import product there was no practical  law in place that prohibited my clients from going out and selling and they went out and they promoted they talk to whole foods they went around and talked to doctors and our argument is that's sufficient there's no case law out there that deals with that fat not and that's why there's a reasonable basis so i mean what's your response to the tax court's statement that this couldn't be reasonable because the we don't need to argue the bigger lie that it's it's a matter of if this is a reasonably debatable issue even if we lose there should be no penalty it's a pure legal issue discussing the issue with regard to the real food for real life is that what point in time did that is miss begin to operate and the law is very clear that you cannot get a deduction under one fifty two until the time that the business has begun to function as a going concern and performed those activities for which it was organized and as you have just been discussing the t here look to the fact that they didn't have liability insurance or business license until two thousand and eleven they didn't pay commission payments until two thousand and eleven to next music for the use of their platform for their sales it didn't begin to important they're trying to to to say that you know we've ordered all of these products of course we were ready i went back and looked at the seven invoices they describe in their reply brief but over half of those invoices contain notations such as quote samples quote try to create products the powders could go into including bars topical browns bread used to make recipes one life for knowledge and it identifies all one thousand two hundred of those bottles the samples these notations let you know that that these products that they were getting weren't for sale they were well you have to have you have to finish the development whether or not you've actually made the sale some of the cases point out isn't the determining factor but you can still be in this development and research stage so that product whatever it is they're developing and i don't really know how a pharmaceutical company set up but in this case they were working with real food and real life was looking at working for what the to get a  probiotic that was powerful that they could sell and that didn't happen and it took them as you suggest testifying years of research and trial in the air and it wasn't until two thousand thousand one hundred and ninety four dollars it's not clear what that was but that would just be one factor that the tax court was looking at here tax court didn't mention that specifically i don't believe  we're looking at trying to determine when this company started as a going concern there are multiple factors that courts look to and so in this case the tax court laid out about research and development cost and they would be covered by one hundred and ninety five not by section one hundred and sixty two i also think it's worth noting that to the extent that they're claiming that they started maybe even to two thousand and eight certainly by two thousand and nine and we're looking at all the inventory they ordered in that year when you look at their tax returns the schedule c which is the profit and loss for the business is there is a line on that form but there is a a check in the box on the two thousand and ten return indicating that when tax payers filed their returns in two thousand and ten they believe they started in that year and earlier of course it's the commissioner's position that the business hadn't started to chat and i think all of those those factual determinations are very persuasive that that they were still in the developmental stage trying to figure out what the best product next reason was to the extent that they're claiming that at the start up cost it's reasonably debatable and therefore the penalty penalty shouldn't apply that they're just wrong the last and settle for decades as to when a taxpayer is engaged in a trade or business or or when they begin to function as a going concern the legal standard to determine when a business commenced is clear and the only question here was whether real food real life met that standard taxpayers arguments in the tax court in finding that they didn't start operating as a business do not implicate any unsettled legal issue or involve the question of st impression the involved the alleged novelty of the facts in this case don't negate the fact that the underlying tax principles involved all settled and therefore they didn't have a reasonably debatable position that justifies  a mix question if the issue tends to be more factually based and concerned factors more appropriate decided by a trial court then you look to the clearly erroneous standard so the court took a functional approach there and i would say that that's what applies here because you have to look at any number of facts to determine what it was these tax payers were doing in terms of trying to get their business off the ground and you know with each different type of business those factors are going to change but that's going to be a factual question particularly where the law has been settled here for for fifty years if you go back to the very good opinion from the case and that is why you would apply a clearly around the standard even if you were going to look toward the next question that this court seems to indicate and you apply this functional approach two things they were importing a g m product directly and selling it and they were developing their own product they did not receive their their own developed product until july of two thousand and nine but they were selling a g m that was clearly  have been their st sale of two hundred dollars or so and in two thousand and that's enough to get them in the door there are two things going on here just read the contract so we're not limited to that so we're so from our standpoint there are multiple things to check the box of two thousand that i'm aware of that there's a reason why we're not arguing reliance on the c p a checking the boxes one of however will take two thousand and ten if a court doesn't this or doesn't