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Thread: Income tax issues in startup year

  1. #1
    Join Date
    Aug 2016
    Location
    Humble, TX
    Posts
    5

    Income tax issues in startup year

    My partner and I organized an LLC, began acquiring equipment for a small nano brewery, and spent some money brewing test batches last year. (2016) We spent around $20K. Now a tax accountant is telling us none of our expenditures are deductible in 2016 because we don't yet have our license and have no revenue. So therefore we are not doing business yet. Are others in this situation getting the same answers from your accountants, or is mine just way too conservative? We thought we could prepare a 1065 and K-1s showing all these expenses and write at least some of them off on our 2016 personal returns.

  2. #2
    Join Date
    May 2016
    Location
    Aberdeen, Wa
    Posts
    8
    Hes correct. I am opening next month and have spent all of last year building out and buying equipment, however because I was not in operation my accountant told me the same thing.

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  3. #3
    Join Date
    Aug 2016
    Location
    Humble, TX
    Posts
    5
    Quote Originally Posted by SteamDonkey View Post
    Hes correct. I am opening next month and have spent all of last year building out and buying equipment, however because I was not in operation my accountant told me the same thing.

    Sent from my VS987 using Tapatalk
    Thanks for the reply. We got different answers from different accountants. We were very conservative with our expenditures. No aggressive deductions like home office expenses, personal utilities, mileage on personal cars, etc. These were all legitimate brewery expenses. We decided to go ahead and deduct in 2016. Worst case, if we get audited and IRS disallows, it should just be a timing difference with the deductions moved into 2017. The accountant we went with has done this with several past clients and no adverse effects to date. It's an aggressive position for sure, but we're going to run with it. This is not a hobby and we're not just testing the waters. We have a legitimate business, just no revenue yet.

  4. #4
    Join Date
    May 2016
    Location
    Aberdeen, Wa
    Posts
    8
    As long as you got someone stamp on it and can point to them I say great. I can see both sides of waiting, 2017 will be much more beneficial for us to start claiming as opposed to 16. But to each his own and glad you got it worked out.

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  5. #5
    Join Date
    Jun 2012
    Location
    Enumclaw, WA
    Posts
    139
    Don't tell the TTB you are brewing on your equipment in your facilities before getting your notice. That's a no no.


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    Prost!
    Eric Brandjes
    Cole Street Brewery
    Enumclaw, WA

  6. #6
    Join Date
    Aug 2016
    Location
    Humble, TX
    Posts
    5
    Quote Originally Posted by Brandjes View Post
    Don't tell the TTB you are brewing on your equipment in your facilities before getting your notice. That's a no no.


    Sent from my iPad using Tapatalk
    I'm actually not doing this, however I don't know of any brewers in the Houston area that weren't brewing test batches before they had their license. Not sure what exactly you're referring to, but thanks for the notice. I will investigate.

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