Wanda owns and operates a restaurant on the north side of Cleveland. She is considering opening a second restaurant on the south side of town and incurs $13,600 of investigation expenses. In July of the current year, Wanda decides not to open a second restaurant. How much of the investigation expenses can Wanda deduct in the current year?
A)$- 0 -
B)$5,000
C)$5,120
D)$5,600
E)$13,600

Question

Quizplus · Accepted Answer

Wanda can deduct the full $13,600 of investigation expenses in the current year. The IRS allows taxpayers to deduct expenses related to investigating the creation or acquisition of an active trade or business. Since Wanda decided not to proceed with the second restaurant, these expenses are considered nondeductible startup costs and can be fully deducted in the year the decision is made not to proceed with the new business.

Wanda Owns and Operates a Restaurant on the North Side