Business owners can deduct ordinary and necessary expenses on their tax returns in the year the costs were incurred, if the costs are substantiated. The U.S. Tax Court ruled that a married couple who reported no income for a new business wasn’t allowed to deduct most costs. They spent money on supplies and materials that were stored for future use. Therefore, they were considered inventory, which must be capitalized (deducted in a year in which it produces income). The couple was allowed some advertising deductions aimed at generating sales. But other costs were disallowed because they weren’t substantiated, were personal or were deemed not to be necessary to the business. (TC Memo 2023-87)