Orange Corporation begins business on April 2,2011.The corporation has startup expenditures of $54,000.If Orange Corporation elects § 195,determine the total amount that Orange may deduct in 2011.

Question

Quizplus · Accepted Answer

According to Section 195 of the IRS code, startup expenditures can be deducted up to a maximum of $5,000 in the year that the business begins operations. However, the amount of the deduction is reduced by the amount by which the total startup expenditures exceed $50,000.

In this case, the startup expenditures are $54,000, which is $4,000 over the $50,000 threshold. Therefore, the maximum amount that Orange Corporation can deduct in 2011 is $5,000 - $4,000 = $1,000.

Therefore, the correct answer is C: $3,650, which is the amount remaining after subtracting the maximum deduction of $1,000 from the total startup expenditures of $54,000.

Orange Corporation Begins Business on April 2,2011