Green Corporation is incorporated on March 1 and begins business on June 1. Green's first tax year ends on October 31, i.e., a short year. Green incurs the following expenses during the year: $$\begin{array} { | l | l | c | }
\hline { \text { Month } } &{ \text { Type } } & \text { Amount } \
\hline \text { February } & \text { Draft charter } & \$ 2,000 \
\text { March } & \text { Stock commission } & 30,000 \
\text { March } & \text { Accounting fees to set up books } & 2,000 \
\text { April } & \text { Temporary director fees } & 2000 \
\text { December } & \text { Charter modification fee } & 1,000 \
\hline
\end{array}$$ What is the deduction for organizational expenses if Green chooses to deduct its costs as soon as pos

Question

Green Corporation is incorporated on March 1 and begins business on June 1. Green's first tax year ends on October 31, i.e., a short year. Green incurs the following expenses during the year: $$\begin{array} { | l | l | c | } 
\hline  { \text { Month } } &{ \text { Type } } & \text { Amount } \
\hline \text { February } & \text { Draft charter } & \$ 2,000 \
\text { March } & \text { Stock commission } & 30,000 \
\text { March } & \text { Accounting fees to set up books } & 2,000 \
\text { April } & \text { Temporary director fees } & 2000 \
\text { December } & \text { Charter modification fee } & 1,000 \
\hline
\end{array}$$ What is the deduction for organizational expenses if Green chooses to deduct its costs as soon as pos

Quizplus · Accepted Answer

Green Corporation can deduct up to $5,000 of organizational expenses in the first year, reduced by the amount by which the total organizational expenses exceed $50,000. The remaining balance is amortized over 180 months. Here, the total organizational expenses are $6,000 ($2,000 + $2,000 + $2,000), so Green can deduct $5,000 immediately and amortize the remaining $1,000 over 180 months, resulting in a deduction of $5,028 for the short year.

Green Corporation Is Incorporated on March 1 and Begins Business