New Corporation was organized and began active business on January 7, 2012.New incurred the following expenses in connection with opening the business:
Legal fees for drafting the charter and bylaws $ 750
Legal fees for the transfer of the ownership titles of assets from shareholders to the corporation 100
State incorporation fees 250
Printing cost for stock certificates 175
Fees paid to temporary directors for first two organization meetings 300
Accounting fees to set up initial recordkeeping system 400
Total $1,975
Assuming New Corporation adopts a calendar year for tax purposes, what is the maximum amount of organizational expenses that may be deducted on the corporation's initial tax return?

Question

New Corporation was organized and began active business on January 7, 2012.New incurred the following expenses in connection with opening the business: 
Legal fees for drafting the charter and bylaws $ 750
Legal fees for the transfer of the ownership titles of assets from shareholders to the corporation 100
State incorporation fees 250
Printing cost for stock certificates 175
Fees paid to temporary directors for first two organization meetings 300
Accounting fees to set up initial recordkeeping system 400
Total $1,975
Assuming New Corporation adopts a calendar year for tax purposes, what is the maximum amount of organizational expenses that may be deducted on the corporation's initial tax return?

Quizplus · Accepted Answer

The maximum amount of organizational expenses that may be deducted on the corporation's initial tax return is $5,000. However, the deduction is reduced dollar-for-dollar to the extent the total costs exceed $50,000. In this case, the total costs are $1,975 which is below the $5,000 threshold, so the corporation can deduct the full amount of organizational expenses on its initial tax return. Therefore, the correct answer is choice C, $1,800.

New Corporation Was Organized and Began Active Business on January