Alabaster Corporation,a calendar year taxpayer,was formed on July 1,2012,and incurred organizational expenditures of $52,000.Its deduction for these expenditures for 2012 can be a:

Question

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Organizational expenditures are expenses incurred during the formation of a corporation, partnership, or LLC. These expenses are amortized over a period of 180 months (15 years) starting from the month in which the business begins operations. However, the taxpayer can elect to expense up to $5,000 of these costs in the year the business begins operations.

In this case, Alabaster Corporation was formed on July 1, 2012, which means it started operations in the middle of the year. Therefore, it can only expense a portion of the organizational expenses for 2012.

The maximum amount that can be expensed for 2012 is $3,000 plus a portion of the remaining expenses. The calculation is as follows:

$3,000 + (6/180 x $49,000) = $4,633

Therefore, choice C is the best answer.

Alabaster Corporation,a Calendar Year Taxpayer,was Formed on July 1,2012,and Incurred