Question

c. $120,000. d. $270,000. e. None of these. 39. Tommy, an automobile mechanic employed by an auto dealership, is considering opening a fast-5food franchise. If Tommy decides not to acquire the fast-food franchise, any investigation expenses are: a. A deduction for AGL b. A deduction from AGI, subject to the 2% floor. c. A deduction from AGI, nor subject to the 2 % floor. d. Deductible up to $5,000 in the current year with the balance being amortized over a 180-month period. e. Not deductible

Answer 1

Answer 39) Option E (Not Deductible)

As per Publication 535 (2018), Business Expenses

If your search for a business or startup of a business fails, costs to you fall into two categories:

If you are an individual and your attempt to start a business is not successful, the expenses you had in trying to establish yourself in business fall into two categories.

1. The costs you had before making a decision to begin a specific business. These are personal costs and nondeductible. They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility.

2. The costs you had in your attempt to acquire or begin a specific business. These costs are capital expenses and you can deduct them as a capital loss.