Orange Corporation begins business on April 2,2015.The corporation reports startup expenditures of $64,000 all incurred last year.Determine the total amount that Orange can elect to deduct in 2015.

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Quizplus · Accepted Answer

According to the IRS rules, a business can elect to deduct up to $5,000 in startup costs and $5,000 in organizational costs in the first year of business. However, this deduction is reduced dollar for dollar for startup costs exceeding $50,000. Since Orange Corporation's startup expenses exceed $50,000, the $5,000 deduction is reduced by $14,000 ($64,000 - $50,000), resulting in a maximum deduction of $3,000 in startup costs. Therefore, choice B ($3,200) is the closest option.

Orange Corporation Begins Business on April 2,2015