attach any references used . Butch Cassidy is your tax client and has started in

Question

attach any references used . Butch Cassidy is your tax client and has started investing in real estate. In March 2014, Butch Cassidy started investigating the real estate market so he could acquire real estate for investment or rental. He created a name for his endeavor-Wild Bunch Investments-and began marketing his services via business cards, flyers, and word of mouth. In May 2014 Butch Cassidy completed a business outline with ''buying, remodeling, renting and wholesaling property" being the stated purpose of Wild Bunch Investments. On October 17, 2014, Butch Cassidy paid $21,490 to the Wealth Wisdom Academy for certain training classes, which he subsequently attended to acquire real estate investment skills. In November 2014 Butch Cassidy applied, and was approved, for a loan from the U.S. Small Business Administration, and he obtained an employer identification number from the IRS. In December 2014 Butch Cassidy obtained a credit card in the name of "Butch Cassidy Wild Bunch Investments" and opened a checking account in the name of "Mr. Butch Cassidy D/B/A Wild Bunch Investments". Throughout 2014 Butch Cassidy looked at many properties he was interested in buying for this real estate investment and rental business. He made multiple offers to purchase properties but was out-bid on most of his offers. In May 2014 Butch Cassidy entered into a contract to purchase a property on Tiger Avenue in Auburn, Alabama. However, after a home inspection revealed many defects in the property, Butch Cassidy canceled the contract because the seller was not willing to make the needed repairs. Butch Cassidy did not purchase any investment or rental property until he purchased the property on Bo Jackson Street in Auburn, Alabama, on December 30, 2014. At that time of the purchase, the unit was vacant. He did get a tenant on January 31, 2015. For tax year 2014 Butch Cassidy wants to file a Form 1040, U.S.Individual Income Tax Return, with an attached Schedule C. Butch Cassidy does not have any gross receipts or sales but wants to report total expenses of $23,373, which consisted of: Car and truck expenses $144 Supplies 153 Meals and entertainment 41 Workshops and training 21,515 Computer and software 1,451 Misc. 69

Explanation / Answer

Ans.)

Any expenditure incurred before effective commenement of business that expenses will be treated as pre operating expenses.

Any expenditure incurred before incorpotion of business organisation shall be treated as pre incorporation expenses.

As per tax laws, above expenses shall be allowed as deduction for certain number of years after effective commencement of business.

In addition to above , if the assessee wants to be shows the income / loss from house property he must be owned such propety.

But here in this question given expenses were incurred not related for acquiring such property (indirect relation with acquiring of the property) so it will be treated as pre operative expenses treated accordingly.

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