I have a question about capitalization of start up costs.
My client is a c corporation that was formed in early 2017. I am working on the corporation's 2017 initial tax return.
This corporation is going to operate a gaming (not gambling) web site. That will be its only business. During 2017, it expended about $1.7 million (which was raised from a small group of investors, none of whom received any remuneration). The expenditures included employee wages (for both regular employees and executives), Similar payments were made to subcontractors (who received 1099's) Money was paid to software developers. Money was expended to lease office space. Legal fees were paid. Funds were expended for travel, lodging, etc.
As of right now, the web site has not opened for business. Revenue from inception through today is zero. It is expected to commence business during the 4th quarter of 2018. A 'test version' of the site opened in March, 2018, but it does not accept payments. The web site was not up at all in 2017.
My question: what, if anything, can be expensed on the corporation's 2017 tax return? Or, do I simply capitalize 100% of the expenditures, pending the start of operations in 2018?
NOTE: I am not particularly interested in distinguishing between organization costs and startup costs - I am willing to address this issue on the 2018 tax return.
Thank you very much for your guidance.