Opinion ID: 578652
Heading Depth: 3
Heading Rank: 2

Heading: Deduction of start-up costs

Text: 50 Again, it is a well-established principle that partnerships may not deduct start-up costs as current business expenses, including amounts paid or incurred to organize a partnership or to promote the sale of (or to sell) an interest in a partnership. See Fishman v. C.I.R., 837 F.2d 309, 312 (7th Cir.) (citing a long line of decisions holding that such expenses must be capitalized), cert. denied, 487 U.S. 1235, 108 S.Ct. 2902, 101 L.Ed.2d 935 (1988). This general rule, first developed in the caselaw, was added to the Internal Revenue Code in 1976. See 26 U.S.C. § 709. Thus Mr. Goulding was negligent in deducting legal fees incurred in connection with the drafting of private placement memoranda and other start-up costs. Again, having been closely involved in the start-up activities and in the drafting of the agreements and private placement memoranda, Mr. Goulding could not reasonably rely on how others characterized these costs. In short, Mr. Goulding has failed to carry his burden of demonstrating that he was not negligent in preparing the partnership returns.