1. Zig Corporation incurs advertising and training costs of $52,500 before its business actually begins. Zig...

1. Zig Corporation incurs advertising and training costs of $52,500 before its business actually begins. Zig Corporation began business on May 1, 2018. Compute the maximum amount of Zig Corporation’s deduction for start-up costs for 2018.

2. John Porter, the sole shareholder of Canit Inc., incurred the following expenses for the year that were reimbursed by the company:

Parking tickets incurred while of business $550

Traffic ticket for running a stop sign when going to a business meeting $150

Political contributions on behalf of the company $750

What is the amount of expenses that Canit Inc. can deduct?

Expert Solution

ANS TO QUES 1.

Zig may deduct up to $5000 of startup costs, including advertising and training cost in there first year of business i.e 2018 and the rest must be depreciated over time , that means cost of $47,500 (52,500-5000) will be deducted in next 15 years(per year 47,500/15=3,167 will be deducted).

ANS TO QUES 2.

Total amount that can be deducted by Caint Inc-

.parking ticket expense can be deducted. If an shareholder receives a parking ticket while working, then this expense can be paid by the company and claimed as a tax deductible expense. Thus $550 will be allowed for deduction

. Fines and penalties a corporation pays to the government for violation of any law are never deductible. For example, a business owner may not deduct tax penalties,traffic ticket for running a stop sign when going to a business meeting or fines for violating city housing codes.Thus $150 will not be allowed for deduction.

.Political Contributions don't qualify for deduction when done by company, Contributions made to a political candidate, a campaign committee or a political party are not deductible when done or reimbursed by company.Thus $750 will not be allowed as deduction.

ans- from the above point it is clear that only reimbursement made for parking tickets will be allowed for deduction i.e $550 can be deducted as expense by Caint inc.

ekkarill92 answered 9 months ago

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