Mann Inc., a calendar year taxpayer, incurred $49,640 start-up expenditures during the preoperating phase of a new business venture. The business started operations in November. Mann expensed the $49,640 on its current-year financial statements. Which of the following statements is true?

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Quizplus · Accepted Answer

According to the tax code, start-up expenditures must be capitalized and amortized over a period of 180 months (15 years), unless an election is made to deduct up to $5,000 in the first year with the remaining amount amortized. Since Mann Inc. expensed the entire $49,640 in the current year, it must make an adjustment on its tax return to capitalize and amortize the expenses. The adjustment would result in a $44,144 unfavorable book/tax difference ($49,640 - $5,496 [$49,640/180]).

Mann Inc, a Calendar Year Taxpayer, Incurred $49,640 Start-Up Expenditures During