Question

Dilly’s dream was to open a cookie shop, so she did her homework carefully be-fore finally opening “Dilly’s Delights” on July 1, 2019. Before that date she had incurred the following “soft costs” –

• $12,000 realtor’s fee for finding a storefront to rent,
• $16,000 attorneys’ fees for negotiating a lease and trademark services,
• $8,000 wage expense for employees during the pre-opening period, and
• $18,000 for pre-opening TV and other advertising.

Calculate and state the exact amount that you, in preparing Dilly’s 2019 return, will enter as her 2019 start-up costs deduction.

Answer 1

ANSWER-$1000

EXPLANATION

INTERNAL REVENUE SERVICE ALOWS YOU TO DEDUCT $5000 IF YOUR START UP COST IS $50000 OR LESS AND IF YOUR COST EXCEEDS $50000, THE AMOUNT OF YOUR ALLOWABLE DEDUCTION WILL BE REDUCED BY THAT DOLLAR AMOUNT LIKE HERE HER START UP COST IS $54000 THAT WHY $4000 DOLLAR IS REDUCED AND MOREOVER IF YOUR START UP COST INCREASED TO $55000 THEN YOU ARE NOT ELIGIBLE FOR THE DEDUCTION