In March of the current year,Marcus began investigating the possibility of opening a specialty clothing store.From March through June,he spent $2,300 on a market survey,$2,700 in consulting fees to find the best location and $3,600 in professional fees setting up an accounting and inventory system.Although he had never run his own business before,on August 1 he opened his doors for business.What is the maximum amount of deduction for the current year attributable to these expenditures?
A)$0
B)$5,000
C)$5,100
D)$8,600

Question

Quizplus · Accepted Answer

The maximum amount of deduction allowable for start-up costs is $5,000. However, Marcus has exceeded this limit with the total cost of $8,600. Therefore, he can only deduct up to $5,000 and the remaining $3,600 must be amortized over 180 months ($20 each month). Thus, the maximum amount of deduction for the current year attributable to these expenditures is $5,100 ($2,300 + $2,700 + $1,100 amortization of the professional fees). Hence, the best choice is C.

In March of the Current Year,Marcus Began Investigating the Possibility