Edison Corporation is organized on July 31. The corporation starts business on August 10. The corporation adopts a November 30 fiscal year end. The following expenses are incurred during the year: $$\begin{array} { | c | l| c | }
\hline \text { Date } & { \text { Type } } & \text { Amount } \
\hline 6 - 30 & \text { Attorney's fees associated with obtaining charter } & \$ 10,000 \
7 - 10 & \text { Underwriter fees for stock sale } & 25,000 \
7 - 15 & \text { Transfer cost for property contributed to the corporation for stock } & 3,000 \
6 - 30 & \text { Costs of organizational meetings } & 2,000 \
12 - 6 & \text { Legal fees to modify charter } & 4,000 \
\hline
\end{array}$$ What is the maximum amount of organizational expenditures that can be deducted by the corporati its first tax year ending November 30?

Question

Edison Corporation is organized on July 31. The corporation starts business on August 10. The corporation adopts a November 30 fiscal year end. The following expenses are incurred during the year: $$\begin{array} { | c | l| c | } 
\hline \text { Date } & { \text { Type } } & \text { Amount } \
\hline 6 - 30 & \text { Attorney's fees associated with obtaining charter } & \$ 10,000 \
7 - 10 & \text { Underwriter fees for stock sale } & 25,000 \
7 - 15 & \text { Transfer cost for property contributed to the corporation for stock } & 3,000 \
6 - 30 & \text { Costs of organizational meetings } & 2,000 \
12 - 6 & \text { Legal fees to modify charter } & 4,000 \
\hline
\end{array}$$ What is the maximum amount of organizational expenditures that can be deducted by the corporati its first tax year ending November 30?

Quizplus · Accepted Answer

Organizational expenditures include costs such as legal fees for charter, organizational meetings, and transfer costs. The IRS allows a deduction of up to $5,000 for organizational expenses, with the remainder amortized over 180 months. Here, the deductible expenses are $10,000 (attorney's fees) + $2,000 (organizational meetings) + $3,000 (transfer costs) = $15,000. The first $5,000 is deductible, and the remaining $10,000 is amortized over 180 months, resulting in an additional deduction of $156 for the first year. Total deduction: $5,156.

Edison Corporation Is Organized on July 31 What Is the Maximum Amount of Organizational Expenditures That Can