Question

Beech Corporation, an accrual basis calendar year taxpayer, was organized and began business on August 1st of the current calendar tax year. During the current year, the corporation incurred the following expenses:

State fees for incorporation $ 685 Legal and accounting fees incident to organization 2,398 Expenses for the sale of stock 2,740 Organizational meeting expenses 1,028

Assuming that Beech Corporation does not elect to expense but chooses to amortize organizational expenditures over 15 years, calculate the corporation's deduction for its current calendar tax year.

Round per month calculation to two decimal places. Round your final answer to the nearest dollar.

Answer 1

Solution

Beech Corporation

Calculation of corporation’s deduction for its current calendar tax year:

amount to be deducted for current year:
State fees for incorporation	$685
Legal and accounting fees incident to organization	$2,398
Organizational meeting expenses	$1,028
total	$4,111
since the corporation chooses to amortize organizational expenses over 15 years,
monthly deductible = 4,111/180 = $22.84
Since the corporation began operations on August 1 of the current calendar tax year, deduction in current year is as follows,
5 months x $22.84 = $114.20

Note: The expenses for sale of stock are not organizational expenditures.