JebSim Inc. was organized on June 1, 2013, and began business on August 10. JebSim elected a calendar year for tax purposes. The corporation incurred $25,160 of legal and other professional fees attributable to its formation. How much of these costs can JebSim deduct on its first tax return?

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Quizplus · Accepted Answer

JebSim can deduct up to $5,000 of startup costs in its first year, but this amount is reduced by the amount by which total startup costs exceed $50,000. Since the costs are $25,160, JebSim can deduct the full $5,000 plus amortize the remaining $20,160 over 180 months, resulting in a total deduction of $5,560 for the first year.