Last year,Green Corporation incurred the following expenditures in the development of a new plant process:

During the current year,benefits from the project began being realized in May.If Green Corporation elects a 60 month deferral and amortization period,determine the amount of the deduction for the current year.

Question

Last year,Green Corporation incurred the following expenditures in the development of a new plant process:
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During the current year,benefits from the project began being realized in May.If Green Corporation elects a 60 month deferral and amortization period,determine the amount of the deduction for the current year.

Quizplus · Accepted Answer

The total cost incurred in the development of the new plant process is $320,000. If Green Corporation elects a 60 month deferral and amortization period, the annual amortization is $320,000/60 = $5,333.33. As benefits from the project began being realized in May, the deduction for the current year will be for 8 months (May-Dec) which is $5,333.33 * 8 = $42,666.64. However, the deduction is limited to 50% of the taxable income before the deduction and before any net operating loss carryback or carryforward. As there is no information provided on taxable income, we cannot calculate the limitation. Therefore, the closest option to the calculated deduction is B) $50,400.

Last Year,Green Corporation Incurred the Following Expenditures in the Development