Green Corp., a cash basis and calendar year taxpayer, was formed and began opera

Question

Green Corp., a cash basis and calendar year taxpayer, was formed and began operations on August 22, 2014. Green incurred the following expenses during its first year of operations (August 22 – Dec. 31): Expenses of temporary directors and organizational meetings $24,000 Fee paid to state of incorporation 7,000 Expenses in printing & sale of stock certificates 7,200 Legal services for drafting corporate charter & bylaws 18,800 Total 57,000 With an election under section 248 to amortize qualifying organizational expenses, how much may the corporation deduct for tax year 2014?

Explanation / Answer

Under section 248, expense deduction will be allowable lessor of:

actual organisation expenses/statup expense

or

$5000 (reduced by the amount ,if oraganisation expenses exceeds $50000.)

Corporation deduct for tax year 2014 = lessor of :

$ 57000

   or

$ NIL($5000-7000) {can not be below zero} here,expenses is more than $50000, so extra $7000 would be reduced by $5000 as per the rules mentioned above

The Corporation deduct for tax year 2014 = NIL

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