Question

8. Juliette formed a new business to sell sporting goods this year. The business opened its doors to customers on June 1. Determine the amount of start-up costs Juliette can immediately expense (not including amortization) this year in the following alternative scenarios. (Leave no answer blank. Enter zero if applicable.)

a. She incurred start-up costs of $2,200.

	Amount of start-up costs immediately expensed ?

b. She incurred start-up costs of $40,250.

	Amount of start-up costs immediately expensed ?

c. She incurred start-up costs of $50,650.

	Amount of start-up costs immediately expensed ?

d. She incurred start-up costs of $60,500.

	Amount of start-up costs immediately expensed ?

e. How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start-up costs (how much of the organizational expenditures would be immediately deductible)?

	Amount of Organizational Expenditures Immediately Expensed (a) ? (b) ? (c) ? (d) ?

Answer 1

a.
Maximum Immediate expense M	$5,000
as per section 195(b)(1)(ii)
Total start up cost T	$2,200
Threshold phase-out P	$50,000
Immediate expense phase out I (T-P)	$0
Allowable Immediate expense	$2,200
lesser of T or (M-I)
b..
Maximum Immediate expense M	$5,000
as per section 195(b)(1)(ii)
Total start up cost T	$40,250
Threshold phase-out P	$50,000
Immediate expense phase out I (T-P)	$0
Allowable Immediate expense	$5,000
lesser of T or (M-I)
c..
Maximum Immediate expense M	$5,000
as per section 195(b)(1)(ii)
Total start up cost T	$50,650
Threshold phase-out P	$50,000
Immediate expense phase out I (T-P)	$650
Allowable Immediate expense	$4,350
lesser of T or (M-I)
d..
Maximum Immediate expense M	$5,000
as per section 195(b)(1)(ii)
Total start up cost T	$60,500
Threshold phase-out P	$50,000
Immediate expense phase out I (T-P)	$10,500
Allowable Immediate expense	-
lesser of T or (M-I)