Question

42 Required information [The following information applies to the questions displayed below Part 3 of 4 Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started: (Leave no answer blank. Enter zero if applicable.) 10 points Еxpenne Date Amount Attorney fees for articles of incorporation March 1-March 30 wagen March 1-March 30 rent Stock iaauance costa April 1 May 30 wages February 10 March 30 32,000 4,500 Skipped March 30 2,000 20,000 12,000 April 1 May 30 eBook Pint Refereaces c. What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 (not including the amount determined in part (b)? (Do not round intermediate calculations.) Start-up costs amortized Organizational expenditures amortized

Answer 1

As per the tax law, the start-up costs can be expensed up to $5,000 and organizational expenditures can each be expensed, up to $5,000, in the year the business begins. On the other hand, the businesses incurring start-up cost or organizational expenses more than the threshold limit of $50,000 are required to reduce $5,000 for immediate expense amount dollar for dollar for expenditures exceeding $50,000. Amortization of startup costs Particulars Maximum immediate expense Total start-up expenditures Phase out threshold Immediate expense phase out Allowable immediate expense Remaining expenditures Recovery period months Monthly straight line amortization Tenton business months during year 1 Year 1 straight line amortization for startup costs Amount $ 5,000.00 $ 6,500.00 $50,000.00 - Note 1 $ 5,000.00 Note 2 $ 1,500.00 Note 3 180 $ 8.33 Note 4 $ 75.00 Note 5 Note 1 Total startup expenditure Phase out threshold Immediate expense phase out $ 6,500.00 $50,000.00 =6500-50000 $ 5,000.00 Note 2 Maximum immediate expense Immediate expense phase out Allowed immediate expenses $ 5,000.00 Note 3 Total startup expenditure Allowable immediate expenses Remaining expenditure $ 6,500.00 $ 5,000.00 $ 1,500.00 Note 4 Remaining expenses Recovery period Monthly straight line amortization $ 1,500.00 $ 180.00 $ 8.33 Note 5 Monthly amortization Number of months Straight line amortization $ $ 8.33 9.00 75.00 Organizational expenditures Particulars Amount Maximum immediate expense $ 5,000.00 Total organizational expensitures $32,000.00 Phase out threshold $50,000.00 Immediate expense phase out - Note 1 Allowable immediate expense $ 5,000.00 Note 2 Remaining organizational expenditures $ 27,000.00 Note 3 Recovery period in months 180 Monthly straight line amortization $ 150.00 note 4 Tenton business months during year 1 Straight line amortization for organizational expenditure $ 1,350.00 Note 5 Note 1 Total startup expenditure Phase out threshold Immediate expenses phase out $32,000.00 $50,000.00 $ 5,000.00 Note 2 Maximum immediate expense Immediate expenses phase out Allowed immediate expenses $ 5,000.00 Note 3 Total start up expenditure Allowable immediate expenses Remaining expenditure $32,000.00 $ 5,000.00 $ 27,000.00 Note 4 Remaining expenses Recovery period Monthly straight line amortization $27,000.00 180 150 Note 5 Monthly amortization Number of months Straight line amortization $ 150.00 $ 9.00 $ 1,350.00