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: $$\begin{array} { | c | l | c | }
\hline \text { Date } & { \text { Type } } & \text { Amount } \
\hline & \text { Attorney's fees associated with obtaining charter } & \
6 - 30 & \text { Underwriter fees for stock sale } & \$ 10,000 \
7 - 10 & \text { Transfer cost for property contributed to the corporation for } & 25,000 \
7 - 15 & \text { stock } & 3,000 \
6 - 30 & \text { Costs of organizational meetings } & 2,000 \
12 - 6 & \text { Legal fees to modify charter } & 4,000 \
\hline
\end{array}$$ What is the maximum amount of organizational expenditures that can be deducted by the corporation for 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: $$\begin{array} { | c | l | c | } 
\hline \text { Date } & { \text { Type } } & \text { Amount } \
\hline & \text { Attorney's fees associated with obtaining charter } & \
6 - 30 & \text { Underwriter fees for stock sale } & \$ 10,000 \
7 - 10 & \text { Transfer cost for property contributed to the corporation for } & 25,000 \
7 - 15 & \text { stock } & 3,000 \
6 - 30 & \text { Costs of organizational meetings } & 2,000 \
12 - 6 & \text { Legal fees to modify charter } & 4,000 \
\hline
\end{array}$$ What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending November 30?

Quizplus · Accepted Answer

The maximum deduction for organizational expenditures is $5,000, reduced by the amount by which total organizational expenditures exceed $50,000. Here, the total is $15,000 ($10,000 + $3,000 + $2,000), so the full $5,000 can be deducted. 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