Question

Oleander Corporation, a calendar year entity, begins business on March 1, 2019. The corporation incurs startup expenditures of $64,000. In your calculations, round any division to 2 decimal places. Round your final answer to the nearest dollar. If Oleander elects § 195 treatment, determine the total amount of startup expenditures that it may deduct in 2019. $

Answer 1

Answer:

$3,556

Explanation:

Because the startup expenditure is above $50,000, the startup expenditures which are not deducted may be amortized over a period of 180 months starting from the beginning of trade.

This is calculated as the startup cost is divided by the total number of months allowed to be amortized and the answer is then multiplied by the months traded during the year. In the case provided the months in which the Oleander Corporation has been trading are 10 months starting from March-December 2019.

Amortizable amount {($64,000 / 180 months) * 10 months}

= $3,556 this is total deduction allowed as startup expenditure.

Answer 2

Answer:

$3,556

Explanation:

Since the startup expenditures of $64,000 incurred by Oleander Corporation is above $50,000, and we have 10 months in 2019 from March 1 since the business started operation, we can prorate over 18 months as required by law and determine the amount deductible for 2019 as follows:

Deductible startup expenditure = (64,000 ÷ 180) × 10 months = 355.56 × 10 = $3,556 to the nearest dollar

Therefore, the amount deductible for 2019 as startup expenditures by Oleander Corporation is $3,556.