Q- A partnership incurred $6,000 of organizational costs and $52.000 of start-up costs in its first...
Q- A partnership incurred $6,000 of organizational costs and
$52.000 of start-up costs in its first year. It began conducting
business on October 1st of its first year. Which of the following
are true?
a- The partnership can immediately deduct all $6.000 of its
organizational costs.
b- The partnership can immediately deduct $5,000 of its
organizational costs and amortize the residue over 180 months
beginning in October of the first year.
c- The partnership can immediately deduct $5,000 of its start up
costs and amortize the residue over 180 months beginning in October
of its 1st year.
d- The partnership can immediately deduct $3,000 of its start up
costs and amortize the residue over 180 months beginning October of
the first year.
e- Only B and D above are correct.
Homework Answers
Answer is e- Only B and D above are correct.
Organizational costs upto $5000 are deducted in first year and residue is amortized over 180 months
Startup costs can also be deducted for $5000 in first year, but if expenses is greater than $50,000, maximum amount is reduced ($5,000) by $1 for each $1 over $50,000 in expenses. I.e. $5000 - $2000 = $3000 is can be deducted in first year and remaining is amortizsd over 180 months
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