Question

1. Nicole organized a new corporation this year.  The corporation began business on April 1, 2019.  She made the following expenditures associated with getting the corporation started:

Expense		Date	Amount
Attorney fees for articles of incorporation		February 10	$32,000
March 1 – March 30 wages		March 30	$4,500
March 1 – March 30 rent		March 30	$2,000
Stock issuance costs		April 1	$20,000
April 1 – May 30 wages		May 30	$12,000

1. What is the total amount of the start-up costs expenditures? What is the total amount of organizational expenditures?
   
   
   
   
2. What amount of the start-up costs may the corporation immediately expense in 2019? What amount of the organizational expenditures may the corporation immediately expense in 2019?
   
   
   
   
3. What amount can the corporation deduct as amortization expense for the organizational expenditures for 2019 (not including the amount it immediately expensed from b.)?  What amount can the corporation deduct as amortization expense for the start-up costs for 2019 (not including the amount it immediately expensed from b.)?
   
   
   
   
4. What would be the total allowable deductions related to organizational expenses in 2019, if Nicole started a sole proprietorship instead? What would be the total allowable deductions related to start-up expenses in 2019, if Nicole started a sole proprietorship instead?
   

Answer 1

a	Startup costs
	March 1 – March 30 wages	$   4,500
	March 1 – March 30 rent	$   2,000
	Startup costs	$     6,500
	Attorney fees for articles of incorporation	$   32,000
	Organisational expenditures	$   32,000
	Immediately Expense
b	Startup costs	$     5,000
	Organisational expenditures	$     5,000
	Startup costs & Organisational expenditures is less than $50,000. Therefore $5,000 can be immediate expense in 2019 as start-up costs and organizational expenditures

c		Organisation expenditure	Startup costs
	Total costs recognized	$ 32,000	$ 6,500
	Amount immediately expense	$   5,000	$ 5,000
	Remaining costs	$ 27,000	$ 1,500
	Amortization period (Months)	$      180	$    180
	Monthly amortization	$      150	$       8
	Amortization period in 2019 (Months)	$         9	$       9
	Amount deductible as amortization expense	$   1,350	$      75
d	In case of sole proprietorship
	Organisational expenditures is treated as Startup Costs. Therefore, $5,000 is immediately expense in 2019 as Start-up costs. There is no Operational Expenditure for Sole Proprietorship
	Organisational expenditures	$                           0