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Episode Summary

In this episode of Concrete #s, George dives into a real U.S. Tax Court case — Kwaku Eason and Ashley L. Leisner v. Commissioner (Tax Court Summary Opinion 2024-17) — where two entrepreneurs lost $40,000 in deductions because the IRS ruled their business hadn’t officially begun.
George breaks down how to determine your true business start date, what the IRS looks for, and how to protect your deductions with the right documentation and planning.
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1. The Setup — $40,000 Gone Wrong
Two business owners invested heavily in education, training, and startup costs. They formed their LLC and deducted everything — only to have the IRS disallow every dollar, claiming the business hadn’t started operating yet.

2. The Lesson — When Does a Business Actually Start?
Forming an entity doesn’t automatically mean your business has started.
According to the IRS, operations begin when you start actively doing business, not just preparing for it.
• Pre-start activities: Training, setting up systems, forming the entity.
• Operational activities: Marketing, bidding jobs, signing contracts, earning income.
Your deductions count once you cross that operational line.

3. The Smart Move — Track Your Timeline
Keep detailed records of when you began operations:
• First day you marketed or advertised
• First bid or proposal submitted
• First client signed
• First payment received
This documentation can make or break your case if the IRS ever challenges your deductions.

4. The Good News — Startup Expense Deductions
Even if your business hasn’t officially started, you don’t lose everything:
• Deduct up to $5,000 of startup costs in the first year
• Amortize (spread) the remaining amount over 15 years
Example: $40,000 in startup costs → $5,000 deducted now, about $2,300 per year over the next 15 years.

5. Real-World Construction Example
If you’re a contractor launching a new division or side business — say, concrete restoration — your startup expenses (tools, insurance, training) count only after operations begin.
Once you start marketing or signing contracts, that’s your official start date.

6. The Takeaway — Timing Is Everything
When your business starts isn’t just a date — it’s a tax event.
Plan it, document it, and talk to your CPA before spending big.
A quick conversation could save you tens of thousands in denied deductions.
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Episode Highlights
• Your business “starts” when you begin operations, not when you file paperwork.
• Track your timeline and keep proof of activity.
• Startup costs can still be deducted — just differently.
• One smart planning meeting with your CPA can prevent huge losses.
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Case Reference
Kwaku Eason and Ashley L. Leisner v. Commissioner, Tax Court Summary Opinion 2024-17

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