Opening new business end of 2012-tax quesiton

Depends if you are starting a C-corporation or flow-through organization (sole proprietorship, LLC, etc.). You should consult tax CPA regardless as some of the advice so far is questionable. I have a BBA/MBA in finance and some personal/corporate/non-profit tax background but am not a CPA.

That said, my knowledge is that the type of expenses and accounting system (cash vs. accrual) plays a factor as if you are using cash method of accounting, you cannot carry over the expense unless it is for inventory (cost of goods). If it is for equipment or property you can choose to amortize/depreciate, or in certain instances use Section 179 write-off. Not having revenues will cause the following problems:

- big red flag for IRS audit
- need to show profit in 3 of 5 years or is audit red flag, so this could take away one year to have a loss

Also, it creates tax issues such as what you're mentioning. The easiest is when revenues are offset by their related expenses; otherwise, you may make decisions you regret, such as choosing accrual accounting method if you are not experienced or have time for bookkeeping of that sort.

Again, consult a tax CPA...it will be well worth it. If you call around, there will be some willing to give you free advice. You could also contact or visit your local IRS tax center and consult one of the IRS reps...they are willing to help more than you think. You could also contact your local small business association. Any of those are likely to give you much more trustworthy advice than you could get here.