Emerald Corporation, a calendar year C corporation, was formed and began operati

Question

Emerald Corporation, a calendar year C corporation, was formed and began operations on July 1, 2014. The following expenses were incurred during the first tax year (July 1 through December 31, 2014) of operations: Expenses of temporary directors and of organizational meetings $9,000 Fee paid to the state of incorporation $1,000 Accounting services incident to organization $2,500 Legal services for drafting the corporate charter and bylaws $3,500 Expenses incident to the printing and sale of stock certificates $4,000 Assuming a Section 248 election, what is the Emerald's deduction for organizational expenditures for 2014?

$0

$533

$5,367

$5,500

None of the above

Explanation / Answer

Emerald's deduction for organizational expenditures for 2014: $5,500

Detail : Total expenditure in the first year = $20000. Emerald Corporation can claim $5,000 off the top as a current deduction. The remaining $15,000 must be amortized over the 180-month period, which is a monthly amount of $83.33. Emerald Corporation's amortization deduction for the first year would be $500 ($83.33 for each of the 6 months she was in business in 2014.). Emerald Corporation total deduction for start-up expenses in the first year would be $5,500.

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