Osha, a cash basis calendar-year partnership, began business on April 1, 20X5. O

Question

Osha, a cash basis calendar-year partnership, began business on April 1, 20X5. Osha incurred and paid the following during 20X5:

Legal work associated with formation of the partnership

$15,260

Accounting work associated with raising additional capital

10,000

What is the maximum amount of deductible organizational costs on Osha's 20X5 partnership return?

a.        $5,000

b.       $5,513

c.        $5,684

d.       $6,013

Legal work associated with formation of the partnership

$15,260

Accounting work associated with raising additional capital

10,000

Explanation / Answer

b.       $5,513

Maximum amount of dedcutible = deductible upto maximum $5000 + [ Amortisation of Remaining Orgainsational cost for 180months during the year]

= $5000 + ( 9 months / 180 months * [15260 - 5000] )

   =$5000 + (0.05 * $10260)

= $5000 + 513

   = $5513

Note:- 9 months is from 1April 2005 to 31 December 2005

organisational cost is Legal work associated with formation of the partnership , Accounting work associated with raising additional capital is not considered as an organisational cost

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