Emerald Corporation, a calendar year C corporation, was formed and began operations on April 1, 2016. The following expenses were incurred during the first tax year (April 1 through December 31, 2016) of operations. $$\begin{array} { l r }
\text {Expenses of temporary directors and of organizational meetings } & \$ 27,000\
\text {Fee paid to the state of incorporation } &1,000\
\text {Accounting services incident to organization } & 15,500\
\text {Legal services for drafting the corporate charter and bylaws } & 9,500\
\text {Expenses incident to the printing and sale of stock certificates} & 6,000\
\end{array}$$ ? Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2016?
A)$0
B)$4,550
C)$5,000
D)$7,400
E)None of the above

Question

Emerald Corporation, a calendar year C corporation, was formed and began operations on April 1, 2016. The following expenses were incurred during the first tax year (April 1 through December 31, 2016) of operations. $$\begin{array} { l r } 
\text {Expenses of temporary directors and of organizational meetings } & \$ 27,000\
\text {Fee paid to the state of incorporation } &1,000\
\text {Accounting services incident to organization } & 15,500\
\text {Legal services for drafting the corporate charter and bylaws } & 9,500\
\text {Expenses incident to the printing and sale of stock certificates} & 6,000\
\end{array}$$ ? Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2016?
A)$0
B)$4,550
C)$5,000
D)$7,400
E)None of the above

Quizplus · Accepted Answer

The § 248 election allows a corporation to amortize organizational expenditures over a period of not less than 60 months. Organizational expenditures are defined as expenses incurred before the end of the first tax year that are directly connected with the creation of the corporation. In this case, the organizational expenditures are the expenses of temporary directors and of organizational meetings, the fee paid to the state of incorporation, the accounting services incident to organization, the legal services for drafting the corporate charter and bylaws, and the expenses incident to the printing and sale of stock certificates. The total amount of organizational expenditures is $59,000. The corporation can elect to amortize these expenditures over a period of not less than 60 months. If the corporation elects to amortize the expenditures over a 60-month period, the deduction for organizational expenditures for 2016 would be $59,000 / 60 * 9 = $4,550.

Emerald Corporation, a Calendar Year C Corporation, Was Formed and Began