RE LLC taxes (expenses, but no properties)

[Amanda George]

My partner and I started a LLC in January 2023 with the intent to purchase an investment rental property. But 2023 interest rates soared and we couldn't find a deal that worked. In the process, we did incur expenses for travel to our target city to view properties, inspection fees, and legal fees for setting up our LLC. Since we have zero income, I'm not inclined to pay a CPA several hundred dollars to do our taxes, so I'm trying to do it myself. Do I need to use form 8825 to report the expenses, even if we have no properties? The form seems to assume you have at least one property.

[Kelly O'Keefe]

It is difficult to give a definitive answer without all of the details, but from what I gather it would be difficult to claim a loss or startup costs without closing on an investment property. In general, investigation expenses and participation comes into effect when you close. Here is the excerpt from the IRS I am basing my answer off of. 

Section 1.165-1(b) provides that, to be allowable as a deduction under § 165(a),
a loss must be evidenced by a closed and completed transaction, fixed by an
identifiable event, and, except as provided in § 165(h) and § 1.165-11, actually
sustained during the taxable year. Section 1.165-1(d)(1) provides that a loss is treated
as sustained during the taxable year in which the loss occurs, as evidenced by a closed
and completed transaction, and as fixed by an identifiable event occurring in such
taxable year.

If anyone else has a recent example of how they claimed this type of loss please let me know.