Question

Blaze operates a restaurant in Cleveland. He travels to Columbus to investigate acquiring a business. He incurs expenses as follows: $1,500 for travel, $2,000 for legal advice, and $3,500 for a market analysis. Based on the different tax consequences listed below, describe the circumstances that were involved in Blaze's investigation of the business.

a. Blaze deducts the $7,000 of expenses.
He must be investigating a business that is  .

b. Blaze cannot deduct any of the $7,000 of expenses.
He must be investigating a business that is  .

c. Blaze acquired a business outside the restaurant industry.
He can currently deduct $ of the expenses and the balance is  

come if the employee does not spend it for supper.

Answer 1

Answer:-

a)The business being investigated by blaze was a restaurant.

Because blaze already in the restaurant business, he can deduct all of the investigationexpenses of $7,000.

b) Evidently the business being investigated was not a restaurant and blaze did not acquire the business.

Consequently, he is not allowed any deduction for the expenses.

c) The business being investigated by blaze in Columbus was not a restaurant, but blaze did acquire the business.

Therefore, he can take a limited deduction of $5,000 and amortize the balance as start-up costs over a 180-month period