Edison Corporation is organized on July 31. The corporation starts business on August 10. The corporation adopts a November 30 fiscal year end. The following expenses are incurred during the year: What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending November 30?

Question

Edison Corporation is organized on July 31. The corporation starts business on August 10. The corporation adopts a November 30 fiscal year end. The following expenses are incurred during the year:  What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending November 30?

Quizplus · Accepted Answer

Organizational expenses are the costs of creating a corporation or partnership, such as legal fees or incorporation fees. According to IRS regulations, a corporation can deduct up to $5,000 of organizational expenses in the year the corporation begins business. In this case, Edison Corporation started business on August 10, so only the expenses incurred between July 31 and August 9 can be considered organizational expenses. The total amount of these expenses is $5,156, so the maximum amount of organizational expenses that can be deducted is $5,000. Therefore, choice C is correct. Choices A, B, and D are incorrect because they exceed the limit set by IRS regulations.

Edison Corporation Is Organized on July 31