Question

In 2019, Pablo, who is not otherwise involved in the gas station business, spends $53,000 investigating the acquisition of a gas station. All costs are ordinary and necessary. Pablo acquires the gas station and begins business on Nov. 1, 2019.What amount can Pablo deduct in 2019 for the expenses incurred in investigating the Module 2 Problem Set 3 acquisition of the gas station if Pablo makes an election to accelerate his deductions as much as possible?

In 2019, Pablo, who is not otherwise involved in the gas station business, spends $53,000 investigating the acquisition of a gas station. All costs are ordinary and necessary. Pablo acquires the gas station and begins business on Nov. 1, 2019.What amount can Pablo deduct in 2019 for the expenses incurred in investigating the acquisition of the gas station if Pablo makes an election to accelerate his deductions as much as possible?

Answer 1

$5000 is the maximum amount that can be write off for costs involved in buying a new business. However, for each dollar that you spend above $50,000, you lose a dollar on the deduction.

As Pablo spent $53,000 he will get only $2000 as write off.

Remaining expenses will have to be amortised over next few years.