Question

Problem 11-6 (Algorithmic)
Special Deductions and Limitations (LO 11.3)

Beech Corporation, an accrual basis calendar year taxpayer, was organized and began business on August 1st of the current calendar tax year. During the current year, the corporation incurred the following expenses:

State fees for incorporation $ 1,105 Legal and accounting fees incident to organization 3,868 Expenses for the sale of stock 4,420 Organizational meeting expenses 1,658

Assuming that Beech Corporation does not elect to expense but chooses to amortize organizational expenditures over 15 years, calculate the corporation's deduction for its current calendar tax year.

Round per month calculation to two decimal places. Round your final answer to the nearest dollar.
$

Answer 1

Answer:

Workings:

State fees for incorporation	$ 1,105
Legal and accounting fees incident to organization	$ 3,868
Organizational meeting expenses	$ 1,658
Total Expenses	$6,631

$4,420 for the expenses for the sale of stock aren’t organizational expenditures and aren’t subject to amortization.

Corporation’s Deduction=Total Expenses/ Amortize period in months

=($6,631/180 months)=$36.84 per month.

Deduction for Calendar Year=($36.84 x 5 months)= $184.2.

Therefore, $184 Can be deducted in current year as the expenses for the sale of stock are not organizational expenditures.