Toby, owner of a cupcake shop in New York, had been considering opening a similar business (i.e., a cupcake shop) in Phoenix. After spending $6,800 investigating such possibilities in Phoenix, Toby decided against opening the store on July 1. What is the maximum amount of deduction for the current year attributable to these expenditures?

Question

Quizplus · Accepted Answer

The maximum amount of deduction for the current year attributable to these expenditures is $6,800. This is because the expenditures were incurred in investigating the possibility of opening a new business, and are therefore considered to be start-up costs. Start-up costs are deductible up to $5,000 in the year in which the business begins operation, and the remaining balance is amortized over a period of not less than 60 months.

Toby, Owner of a Cupcake Shop in New York, Had