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If two people start a horse showing business in year one and have expenses of $20,000...

If two people start a horse showing business in year one and have expenses of $20,000 and no income in year one, can they deduct their start up costs under section 195?

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Section 195 start-up expenses are expenses that are incurred before the business starts operations. Start-up expenses include costs incurred to investigate the creation or acquisition of a business or creating a new business. This allows an initial deduction of up to $5,000 in excess of $50,000 start-up expenses while the rest of the expenses can be written off over a period of 15 years. Since in our case, the expenses total only to $20,000 it cannot be deducted as start-up expenses u/s 195.

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