Racine started a new business in the current year. She incurred $52,000 of start-up costs. If her business started on November 23ʳᵈ of the current year, what is the total expense she may deduct with respect to the start-up costs for her initial year, rounded to the nearest whole number?
A) $2,555.
B) $3,544.
C) $5,522.
D) $52,000.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The maximum immediate expense amount of $5,000 phases out dollar for dollar if more than $50,000 of start-up costs are incurred. Thus, the immediate expensing is $3,000 ($5,000 − ($52,000 − $50,000)). The remaining amount is amortized over 180 months and results in an additional deduction of $544 [($49,000/180) × 2 months] for the year.

Racine Started a New Business in the Current Year