Mr. Z, a calendar year taxpayer, opened a new car wash. Prior to the car wash’s

Question

Mr. Z, a calendar year taxpayer, opened a new car wash. Prior to the car wash’s grand opening on October 8, Mr. Z incurred various start-up expenditures (rent, utilities, employee salaries, supplies, and so on). In each of the following cases, compute Mr. Z’s first-year deduction with respect to these expenditures. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

A) The start-up expenditures totaled $4,920. B) The start-up expenditures totaled $33,440. C) The start-up expenditures totaled $52,780. D)The start-up expenditures totaled $94,500.

A) deducction =

B) deduction

C) deducton D) DEDUCTION

Explanation / Answer

Business start up costs for individual businesses :

- $5,000 write off in the year 1 (reduce $ for $ for total costs greater than 50,000)

- Balance is amortized over 180 months including the first year (start from start up month)

A)

Deduction = $4,920

B)

Deduction = $5,000 + [($33,440 - $5,000) * 3 / 180]

= $5,000 + $474

= $5,474

C)

Deduction = ($5,000 - $2,780) + [($52,780 - $2,220) * 3 / 180]

= $2,220 + $843

= $3,063

D)

Deduction = $94,500 * 3 / 180

= $1,575

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.