Question

Juliette formed a new business to sell sporting goods this year. The business opened its doors to customers on June 1. Determine the amount of start-up costs Juliette can immediately expense (not including the portion of the expenditures that are amortized over 180 months) this year in the following alternative scenarios:
a. She incurred start-up costs of $4,200. what amount of start-up costs immediately expensed ?___
b. She incurred start-up costs of $45,500. what amount of start-up costs immediately expensed ?___
c. She incurred start-up costs of $53,800.what amount of start-up costs immediately expensed ?___ .
d. She incurred start-up costs of $65,500.what amount of start-up costs immediately expensed ?___
e. How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start-up costs (how much of the organizational expenditures would be immediately deductible)?

Answer 1

Answer:

1) She incurred start-up costs of $2,500.

a) Amount of start up costs immediately expensed?

$2,500, computed as follows:

1 Maximum immediate expense 5000 S 195(b)(1)(ii)

2 Total start-up costs 2500 Given In

problem

3 Phase-out threshold 50000 S 195(b)(1)(ii)

4 Immediate expense phase-out 0 (2-3)

Allowable immediate expense 2500 Lessor of (2)or-(1)-(4)

______________

2) She incurred start-up costs of $41,000

a) Amount of start up cost immediately expensed

$5000, computed as follows:

 

1 Maximum immediate expense 5000 S 195(b)(1)(ii)

2 Total start-up costs 41000 Given In

problem

3 Phase-out threshold 50000 S 195(b)(1)(ii)

4 Immediate expense phase-out 0 (2-3)

Allowable immediate expense 5000 Lessor of (2)or-(1)-(4)

3) She incurred start-up costs of $51,100.

a) Amount of start up cost immediately expensed

$3900, computed as follows:

 

1 Maximum immediate expense 5000 S 195(b)(1)(ii)

2 Total start-up costs 51100 Given In

problem

3 Phase-out threshold 50000 S 195(b)(1)(ii)

4 Immediate expense phase-out 1100 (2-3)

Allowable immediate expense 3900 Lessor of (2)or-(1)-(4)

4) She incurred start-up costs of $61,250.(Leave no answer blank. Enter zero if applicable.)

$0, computed as follows:

 

1 Maximum immediate expense 5000 S 195(b)(1)(ii)

2 Total start-up costs 61250 Given In

problem

3 Phase-out threshold 50000 S 195(b)(1)(ii)

4 Immediate expense phase-out 11250 (2-3)

Allowable immediate expense 0 Lessor of (2)or-(1)-(4)

5) How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start-up costs (how much of the organizational expenditures would be immediately deductible)?

Answer:

The answers would be the same if these were organizational expenditures instead ofstart-up costs.Note, however, that organizational expenditures only apply tocorporations and partnerships and do not apply to businesses organized as soleproprietorships

Explanation:

Hope you got it :)