Start Up Costs Write Off for Shell Entity - Dollar Limit? Time limit?

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Joined: Wed Jan 31, 2018 11:47 am

Start Up Costs Write Off for Shell Entity - Dollar Limit? Time limit?

Post by oaks » Wed Jul 18, 2018 11:46 am

Hi All!

I have a shell partnership LLC that has been filing net 5 to 10 dollar LOSSES each year for the past 5 years. It was an active business over 5 years ago but I sold off the assets in a business sale and just kept the empty shell and have been filing 5 to 10 dollar losses per year for things like postage filing tax returns and state entity renewals. The partners are me and my spouse and the spouse was always an inactive/passive partner.

I have kept the entity, filing the renewals and tax returns for all these years incase an opportunity presents itself so that I don't have to go through the hassle of setting up a new entity. An opportunity has presented itself but I want to make sure that I am conscientious of taxes.

I estimate that my start-up (one time costs) to get this new business idea off the ground at around $75k. The issue is that it will take 5 to 6 months to get off of the ground so there is a 100% certainty that I will have 0 revenue for 2018 while all of those costs will be incurred in 2018.

I have the income in 2018 from my other businesses, W2, investments, etc to absorb that $75k loss without any carry forward but I'm not certain that even matters. As always in business, there is no guarantee that I dump $75k into this and even generate that much in revenue in 2019 so I am looking at this so that if I completely lose $75k that I atleast get a tax write-off.

Can your wisdom shine on this scenario? I'm worried that because I've taken a loss for the past 5 years (albeit less than $100 total in all 5 years) that somehow that triggers the IRS in saying that it is a hobby business or something and so it won't consider big losses (prior to revenue). If this is true, I'll dissolve this entity and create a new one, but that will delay me on this project by a month or two as I work with the state in getting entity approval.

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