Henrietta, the owner of a very successful hotel chain in the
Southeast, is exploring the possibility of expanding the chain into
a city in the Northeast. She incurs $28,500 of expenses associated
with this investigation. Based on the regulatory environment for
hotels in the city, she decides not to expand. During the year, she
also investigates opening a restaurant that will be part of a
national restaurant chain. Her expenses for this are $55,000. She
proceeds with opening the restaurant, and it begins operations on
May 1.
Determine the amount Henrietta can deduct in the current year for
investigating these two businesses. In your computations, round the
per-month amount to the nearest dollar and use rounded amount in
subsequent computations.
a. The deductible amount of investigation expenses related to expansion of her hotel chain into another city: $
b. The deductible amount of investigation expenses related to opening a restaurant: $
Part A
The deductible amount of investigation expenses related to expansion of her hotel chain into another city: $28500
As Henrietta is engaged in the hotel business, all investigation expenses related to the hotel business are deductible.
Part B
The deductible amount of investigation expenses related to opening a restaurant: $2448
As Henrietta is not engaged in the restaurant business, only the part of investigation expenses related to the restaurant business are deductible. Of the$55,000, an amount of $0 [$5,000 − $5,000 (reduction for excess over $50,000)] can be immediately expensed. The balance of $55,000 ($55,000 −$0) is amortized over a period of 180 months at the rate of $306 per month ($55,000 ÷ 180) starting from May. Therefore deduction = 306*8 = $2448
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility...
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $74,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $54,200. She proceeds with opening the restaurant,...
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $39,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $51,600. She proceeds with opening the restaurant,...
Problem 6-42 (Algorithmic) (LO. 3) Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $46,000 of expenses associated with this investigation. Based on the regulatory environment for hotels in the city, she decides not to expand. During the year, she also investigates opening a restaurant that will be part of a national restaurant chain. Her expenses for this are $53,400. She...
Compute his taxable income: Just part (B) please Problem 6-34 (a) (LO. 1) Geoffrey, age 45, is recently divorced and maintains a household in which his dependent aunt lives. He has the following income and expenses in 2020: Salary income Interest income Dividend income Child support paid Mortgage interest on residence Property tax on residence Medical expenses for Geoffrey Medical expenses for aunt Penalty imposed on premature withdrawal of funds from a certificate of deposit $74,000 1,200 1,800 12,000 2,500...