Javva the Cup decided to give up kidnapping, smuggling, and other criminal activ

Question

Javva the Cup decided to give up kidnapping, smuggling, and other criminal activities, and start an honest living as an independent tour guide by spending all of the following on January 2, 2012. He spent $3,000 on obtaining a market analysis for operating his tour guide business. He spent another $8,000 in advertising. Finally, he spent $12,000 in hiring an accountant to organize his accounting and a sales agent to locate potential customers. He officially opens his doors for business on December 1, 2012. Assuming Javva will make all applicable elections, which of the following is true?
Answer


(a) Javva will only be able to deduct $5,000 in 2012. The rest will be capitalized until he disposes his tour guide business, at which time, he can only then deduct the remaining expenses.

(b) Javva hasn't started his new business yet as of January 2, 2012, so he cannot deduct any of the expenses in 2012.

(c) Javva can deduct $1,533 of business expenses in 2012.

(d) Javva can deduct a total of $5,100 of those business expenses in 2012.

(e) None of the above.

Explanation / Answer

(e) None of the above. Because he can show all the expenses on Dec 2

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