Coral Corporation, an accrual basis taxpayer, was formed and began operations on October 1, 2009.The following expenses were incurred during the first tax year (October 1 to December 31, 2009) of operations: $\begin{array}{lr}
\text { Expenses of temporary directors and of organizational meetings } & \$ 20,000 \
\text { Fee paid to the state of incorporation } & 1,600 \
\text { Accounting services incident to organization } & 6,800 \
\text { Legal services for drafting the corporate charter and bylaws } & 2,000 \
\text { Expenses incident to the printing and sale of stock certificates } & 4,000\&\$34,400
\end{array}$ Assume Coral Corporation makes an appropriate and timely election under § 248(c) and the related Regulations.What is the maximum organizational expense Coral may write off for tax year 2009?
A)$507.
B)$5,000.
C)$5,423.
D)$5,490.
E)None of the above.

Question

Quizplus · Accepted Answer

Coral Corporation can immediately deduct up to $5,000 of organizational expenses under § 248, reduced by the amount by which total organizational expenses exceed $50,000. The remaining balance is amortized over 180 months. Here, the total organizational expenses are $30,400 ($20,000 + $1,600 + $6,800 + $2,000), so the full $5,000 can be deducted immediately. The remaining $25,400 is amortized over 180 months, resulting in an additional deduction of $423 for 3 months ($25,400/180 * 3). Thus, the total deduction for 2009 is $5,423.

Coral Corporation, an Accrual Basis Taxpayer, Was Formed and Began