Question

Please show work and answer both questions

30. Printer Company pays a $25,000 annual membership fee to a trade association for paper wholesalers. The trade association estimates that 60% of its dues are
allocated to lobbying activities. a. What are Printer’s total deductible expenses for tax purposes? b. Assume the same facts as above, except that the $25,000 was incurred for in-house lobbying expenses. What are Printer’s total deductible expenses for tax purposes?

31. 3 Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the bakery on November 1, 2018. Stanford incurred the following expenses:
Total investigation costs related to the restaurant 28,000

Total investigation costs related to the bakery 51,000
What is the maximum amount Stanford can deduct in 2018 for investigation expenses.

Answer 1

1)Printer’s total deductible expenses for tax purposes = $25000 x (1-60%)	$10,000.00
Deductible expenses are applies on Pro-Rata portion on dues of trade association allocated to lobbying activities.
2)
For In-house lobbying expenses total deductible expenses for tax purposes =	$0.00
This is one of the exception rule of disallowing lobbying activities when it is provided for in house lobbying expenses.

2)

a)Since Stanford is not in the restaurant business and he does not acquire the restaurant, the $28,000 is not deductible
b)
Stanford is not in the business same or similar to one being investigated but he acquires the bakery business, the expenses has been capitalized as startup expenses. The start up expenses are not deductible as it is incurred before business got operational so maximum deduction of $5000 is allowed in first year remaining will be amortised over 180 months beginning with the month business begins.
The Expenses incurred is $51000 , $5,000 deduction is reduced dollar for dollar for those expenses in excess of $50,000. $51,000 – 50,000 = $1,000 reduction.$5,000 – $1,000 = 4,000 deduction.
The remaining expenses of $47,000 ($51,000 – 4,000) can be amortized over 180 months beginning with the month business begins,which is November
Total Amortization Expense for a year = $47,000/180 months x 2 months =	$522.22
Total deduction = $4000 + $522	$4,522