Suzanne and Laura form a partnership to market local crafts. In April, the two w

Question

Suzanne and Laura form a partnership to market local crafts. In April, the two women spent $1,600 searching for a retail outlet, $1,200 to have a partnership agreement drawn up, and $2,000 to have an accounting system established. During April, they signed contracts with a number of local crafters to feature their products in the retail outlet. The outlet was fitted and merchandise organized during May. In June, the store opened and sold its first crafts. The partnership paid $500 to an accountant to prepare an income statement for the month of June. What tax issues should the partnership consider with regard to beginning this business?

Explanation / Answer

Start up expenses:

Searching for an oulet is a start up expense and can be deducted in the year of starting operations upto an amount of 5000, hence 1600 is fully deductible.

Organisation expense:

Amounts incurred in connection with formation of partnership is organisational expense hence partnership agreement costs of 1200 and accounting system costs of 2000 will be deductive fully.

Regualr business:

Paying an accountant for preparing income statement is an ongoing business expenditure and deductible as regular business expenditure fully i.e 500

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