45. In May of the current year, Jose began investigating the possibility of open

Question

45. In May of the current year, Jose began investigating the possibility of opening a specialty computer store. From May through September, he spent $2,100 on a market survey, $3,200 in consulting fees to find the best location and $3,300 in professional fees setting up an accounting and inventory system. Although he had never run his own business before, on November 1 he opened his doors for business. What is the maximum amount of deduction for the current year attributable to these expenditures? A) $o B) $5,040 C) $5,060 D) $7,700

Explanation / Answer

Solution.

Answer: C

Explanation: Jose may elect to deduct lesser of the $8,600 expenses incurred or $5,000 currently.

He can amortize the remaining $3,300 over 330 months, resulting in $10 per month.

His current year amortization is $10 × 6 = $60,

for a total deduction of $5,060.

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