Check my answer. Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2020. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation’s deduction for organizational expenditures for 2020 Section 248 allows Cherry corporation to take an immediate deduction of $5,000 for organizational expenditures and amortized the remaining balance over 180 months beginning with the month in which the business begins. Since Cherry Corp’s organization expenditures exceed $50,000 section 248 also requires an immediate dollar for dollar reduction for the amount over $50,000. 54,000-50,000=4,000 immediate phase out reduction, 5,000-4,000=1,000, remaining available immediate deduction. 54,000-1000=53,000/180month=294.44 There are 9 months of operation in 2020 =294.44*9=2649.96+1000=3649.96 total deduction or $3650
Check my answer.
Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2020. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation’s deduction for organizational expenditures for 2020
Section 248 allows Cherry corporation to take an immediate deduction of $5,000 for organizational expenditures and amortized the remaining balance over 180 months beginning with the month in which the business begins. Since Cherry Corp’s organization expenditures exceed $50,000 section 248 also requires an immediate dollar for dollar reduction for the amount over $50,000.
54,000-50,000=4,000 immediate phase out reduction, 5,000-4,000=1,000, remaining available immediate deduction. 54,000-1000=53,000/180month=294.44 There are 9 months of operation in 2020 =294.44*9=2649.96+1000=3649.96 total deduction or $3650
In the first year, the deduction is allowed lesser of:
Actual expenses incurred or $5,000 Subject to after deducting any amount which is in excess of $50,000.
The Balance amount (If any) would be amortized for 180 months that will be started from the month of commencement of business.
Therefore,
The total expenses by the C corporation are $54,000. The deduction applicable would be lesser of
$54,000 or $5,000-$4,000 ($54,000-$50,000)=$1,000.
The remaining balance would be amortized for 180 months:
The remaining balance=$54,000-$1,000
= $53,000
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