Cherry Corporation, a calendar year C corporation, is formed and begins business on 8/1/2019. In connection with its formation, Cherry incurs organizational expenditures of $51,200.
Round the per month amount to two decimal places. Round your final answer to the nearest dollar.
Determine Cherry Corporation's deduction for organizational expenditures for 2019. $ 2,394
Solution:
Cherry Corporation's deduction for organizational expenditures for 2019 = $ 5,117
Immediate Expense ($5000 - ($ 51,200 - $ 50,000)) | $ 3,800.00 |
Amortization +{($ 51,200 - $ 3,800) / 180 Months } * 5 Months in tax year 2019 | $ 1,316.67 |
Total Deduction for 2019 | $ 5,117.00 |
Notes:
1) Deduction of organisational expenditure for the year 2019 is allowed to the lesser of following:
a) Actual Expense incurred
b) $ 5,000, after reducing that amount in excess of $50,000. remaining amount will be amortized for 180 months starting from the month in which business has started.
c) In 2019, there are 5 more months available till ending month. So, amortize for 5 months in current year.
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