Question

Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the bakery on November 1, 2019. Stanford incurred the following expenses: Total investigation costs related to the restaurant $36,750 Total investigation costs related to the bakery 53,500 If required, round any division to two decimal places and use in subsequent computation. Round your final answer to the nearest dollar. What is the maximum amount Stanford can deduct in 2019 for investigation expenses?

Answer 1

Answer:

$2,077.78

Explanation:

As for the provided information:

As the restaurant was not acquired, cost related to acquisition of restaurant will not be considered:

That is $36,750 is not eligible for any deduction.

Now expenses for considering the bakery $53,500 will not be allowed all at once.

Now there is deduction of $5,000 which shall be reduced from $ to $ for exceeding $50,000

Reduced = $53,500 - $50,000 = $3,500

$5,000 - $3,500 = $1,500 deductions.

Now, $53,500 - $1,500 = $52,000 is the deduction allowed in 180 months

Deduction per month = $288.88 per month

Deduction for 2 months will be  = $288.88 $\times$ 2 = $577.78

Therefore, eligible deduction = $577.78 + $1,500 = $2077.78