Question

Cherry Corporation, a calendar year C corporation, is formed and begins business on 8/1/2019. In connection with its formation, Cherry incurs organizational expenditures of $51,200.

Round the per month amount to two decimal places. Round your final answer to the nearest dollar.

Determine Cherry Corporation's deduction for organizational expenditures for 2019. $ 2,394

Answer 1

Solution:

Cherry Corporation's deduction for organizational expenditures for 2019 = $ 5,117

Immediate Expense ($5000 - ($ 51,200 - $ 50,000))	$ 3,800.00
Amortization +{($ 51,200 - $ 3,800) / 180 Months } * 5 Months in tax year 2019	$ 1,316.67
Total Deduction for 2019	$        5,117.00

Notes:

1) Deduction of organisational expenditure for the year 2019 is allowed to the lesser of following:

a) Actual Expense incurred

b) $ 5,000, after reducing that amount in excess of $50,000. remaining amount will be amortized for 180 months starting from the month in which business has started.

c) In 2019, there are 5 more months available till ending month. So, amortize for 5 months in current year.