Question

In 2019, Pablo, who is not otherwise involved in the gas station business, spends $53,000 investigating the acquisition of a gas station. All costs are ordinary and necessary. Pablo acquires the gas station and begins business on Nov. 1, 2019 What amount can Pablo deduct in 2019 for the expenses incurred in investigating the acquisition of the gas station if Pablo makes an election to accelerate his deductions as much as possible?

Answer 1

As per IRS you are allowed to deduct $ 5,000 for the start up cost which you have incurred and were necessary if the total cost is less than $55,000 .The remaining cost will be amortized over the next 15 years equally and will be available for deduction. However the total cost exceed this limit you are not allowed any deductions whatsoever.

Also any amount exceeding $ 50,000 will reduce your allowable deduction by that exceeding amount.

Like in the given case the total expenditure by Pablo is $ 53,000 , hence the exceeding $ 3,000 will not be available for deduction and hence only $ 2,000 will be allowed for deduction.

Therefore the maximum amount of deduction which can be claim by Pablo in 2019 is $ 2,000. And the remaining amount will be allowed as deduction over the next 15 years (180 months) equally.