Chapter 6, Problem 19DQ

Blaze operates a restaurant in Cleveland. He travels to Columbus to investigate acquiring a business. He incurs expenses as follows: $1,500 for travel, $2,000 for legal advice, and $3,500 for a market analysis. Based on the different tax consequences listed below, describe the circumstances that were involved in Blaze’s investigation of the business.

1. a. Blaze deducts the $7,000 of expenses.
2. b. Blaze cannot deduct any of the $7,000 of expenses.
3. c. Blaze deducts $5,000 of the expenses and amortizes the $2,000 balance over a period of 180 months.