Orange Corporation begins business on April 2,2010.The corporation has startup expenditures of $54,000.If Orange Corporation elects § 195,determine the total amount that Orange may deduct in 2010.

Question

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If Orange Corporation elects § 195, it may deduct up to $5,000 of its startup expenditures in the year the business begins. However, the deduction is reduced dollar-for-dollar by the amount of startup expenditures exceeding $50,000. 
In this case, the startup expenditures are $54,000, which exceeds the $50,000 threshold. Therefore, the deduction is reduced by $4,000 ($54,000 - $50,000), and Orange Corporation may deduct a total of $1,000 ($5,000 - $4,000) in 2010.

Therefore, the correct option is C, $3,650.

Orange Corporation Begins Business on April 2,2010