Juliette formed a new business to sell sporting goods this year. The business opened its doors to customers on June 1. Determine the amount of start-up costs Juliette can immediately expense (not including amortization) this year in the following alternative scenarios:
1) She incurred start-up costs of $2,500.
a) Amount of start up costs immediately expensed?______________
2) She incurred start-up costs of $41,000
a) Amount of start up cost immediately expensed
3) She incurred start-up costs of $51,100.
a) Amount of start up cost immediately expensed
4) She incurred start-up costs of $61,250.(Leave no answer blank. Enter zero if applicable.)
a) Amount of start up cost immediately expensed
1) She incurred start-up costs of $2,500.
- a) Amount of start up costs immediately expensed?
$2,500, computed as follows:
| Description | Amount, | Explaination | |
| 1 | Maximum immediate expense | 5000 | S 195(b)(1)(ii) |
| 2 | Total start-up costs | 2500 | Given In problem |
| 3 | Phase-out threshold | 50000 | S 195(b)(1)(ii) |
| 4 | Immediate expense phase-out | 0 | (2-3) |
| Allowable immediate expense | 2500 | Lessor of (2)or-(1)-(4) |
______________
2) She incurred start-up costs of $41,000
- a) Amount of start up cost immediately expensed
$5000, computed as follows:
| Description | Amount, | Explaination | |
| 1 | Maximum immediate expense | 5000 | S 195(b)(1)(ii) |
| 2 | Total start-up costs | 41000 | Given In problem |
| 3 | Phase-out threshold | 50000 | S 195(b)(1)(ii) |
| 4 | Immediate expense phase-out | 0 | (2-3) |
| Allowable immediate expense | 5000 | Lessor of (2)or-(1)-(4) |
3) She incurred start-up costs of $51,100.
- a) Amount of start up cost immediately expensed
$3900, computed as follows:
| Description | Amount, | Explaination | |
| 1 | Maximum immediate expense | 5000 | S 195(b)(1)(ii) |
| 2 | Total start-up costs | 51100 | Given In problem |
| 3 | Phase-out threshold | 50000 | S 195(b)(1)(ii) |
| 4 | Immediate expense phase-out | 1100 | (2-3) |
| Allowable immediate expense | 3900 | Lessor of (2)or-(1)-(4) |
4) She incurred start-up costs of $61,250.(Leave no answer blank. Enter zero if applicable.)
$0, computed as follows:
| Description | Amount, | Explaination | |
| 1 | Maximum immediate expense | 5000 | S 195(b)(1)(ii) |
| 2 | Total start-up costs | 61250 | Given In problem |
| 3 | Phase-out threshold | 50000 | S 195(b)(1)(ii) |
| 4 | Immediate expense phase-out | 11250 | (2-3) |
| Allowable immediate expense | 0 | Lessor of (2)or-(1)-(4) |
5) How would you answer parts (a) through (d) if she formed a partnership or a corporation and she incurred the same amount of organizational expenditures rather than start-up costs (how much of the organizational expenditures would be immediately deductible)?
Answer:
The answers would be the same if these were organizational expenditures instead ofstart-up costs.Note, however, that organizational expenditures only apply tocorporations and partnerships and do not apply to businesses organized as soleproprietorships
