I am working on an individual return. The guy set up an S-Corp (sole shareholder) back in November 0f 2003. During that time, he incurred (charged to a credit card) almost 11,000 of business related expenses that were almost all attrubited to start up. I am pretty sure he filed his form 2553 for his S-Corp election. I am not sure if he got the approval back. I have to ask him tomorrow. Will I be able to deduct the entire 11,000 on the 1040 and offset it against the wages he made from his regular job since it's not passive activity?

From what I know I doubt that he can deduct the entire 11,000 of business related expenses at once because the financial statements are preapred on an accrual and not cash basis. Perhaps next tax year, he will be able to deduct these expenses since he will disburse the cash to pay the credit card that he charged to pay for the start up costs of the company. He filed for S-Corp status in November 2003.

As far as any corroborating documentation, the only docs I have are a Balance Sheet and P&L that he prepared along with an annual credit card activity statement where he checked off which ones were related to business and entered them into the P&L. There are some other income items that do not pertain to operations at all. I am not sure what these are so that's another question I have to ask him. Is there anything else I should attach with the return? I'm afraid that if I only give them a P&L, Balance Sheet, Credit Card Activity Statement and form 2553, they would ask for more.


I'm sorry for my ignorant questions. It's been a while since I did an S-Corp Return much less a 1st year K-1 and Schedule E S Corp return. Thanks in advance for any assistance.