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?

Question

Quizplus · Accepted Answer

The maximum amount of deduction for the current year attributable to these expenditures is $5,100. This is because the costs of the market survey, consulting fees, and professional fees are all considered start-up costs, which are amortized over a period of 60 months. The maximum amount of start-up costs that can be amortized in the first year is $5,000, plus an additional $100 for each month that the business is in operation during the first year. In this case, the business was in operation for 5 months during the first year, so the maximum amount of start-up costs that can be amortized in the first year is $5,100.

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