Egret Corporation, a calendar year C corporation, was formed on March 6, 2015, and opened for business on July 1, 2015. After its formation but prior to opening for business, Egret incurred the following expenditures: Accounting $7,000 Advertising 14,500 Employee payroll 11,000 Rent 8,000 Utilities 1,000 Round the per-month amount to two decimal places. Round other computations and the final answer to the nearest dollar. Assuming the company makes the § 195 election, the maximum amount of these expenditures that Egret can deduct in 2015 is $

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17 June, 03:11

Egret Corporation, a calendar year C corporation, was formed on March 6, 2015, and opened for business on July 1, 2015. After its formation but prior to opening for business, Egret incurred the following expenditures: Accounting $7,000 Advertising 14,500 Employee payroll 11,000 Rent 8,000 Utilities 1,000 Round the per-month amount to two decimal places. Round other computations and the final answer to the nearest dollar. Assuming the company makes the § 195 election, the maximum amount of these expenditures that Egret can deduct in 2015 is $

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Sierra · Answer 1

Total start up expense incurred = 7000 + 14500 + 11000 + 8000 + 1000 = 41500

Explanation:

All $41,500 of the expenditures are startup expenditures. Egret can elect under § 195 to currently write off the first $5,000 and to amortize the remaining amount of such expenditures over a 180-month period beginning with the month in which it begins business (i. e., JULY 1, 2015). Thus, Egret's deduction in 2015 for startup expenditures is $6,217 {$5,000 + $1,217 [ ($41,500 - $5,000) : 180 months * 6 months]}. Egret makes the § 195 election simply by claiming the deduction on its 2015 tax return. (If Egret decides to forgo the § 195 election, the $41,500 must be capitalized and is deductible only when the corporation ceases to do business and liquidates.)