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In the current year, D Inc. had the following expenses: $5,000 interest on a loan used...

In the current year, D Inc. had the following expenses: $5,000 interest on a loan used to acquire equipment, $40,000 for scientific research and experimental development activity, and $80,000 for stock based compensation expense. The interest was accrued and paid in the following year. Determine the amount that D’s net income for tax purposes will decrease in the current year due to these expenses.

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Answer #1

$5,000 interest on a loan used to acquire equipment = Allowed for deduction,

$40,000 for scientific research and experimental development activity = Fully allowed for deduction in the first year of expense,

$80,000 for stock based compensation expense = not allowed.

Total amount that D’s net income for tax purposes will decrease in the current year due to these expenses = $45,0000.

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