Question

Dale begins a new business on April 1, 2019. The business reports startup expenditures of $52,000 all incurred last year. Determine the maximum total amount that Dale can elect to deduct in 2019.

Answer 1

Based on the information available in the question we can answer as follows:-

Per IRS, a business can deduct upto $5,000 of startup expenses per year during the 2019 tax year. However , the deduction is phased out dollar by dollar for every dollar of startup expenses spent in greater of $50,000. Per the observation of the question we understand that Dale has spent $52,000 as Startup expenses during 2019. Hence, the deduction allowed for Dale is :-

Phase - out:- $52,000 - $50,000 = $2,000 phase out

Hence out of the allowed deduction of $5,000 , $2,000 has been phased out.

The amount that Dale can elect to deduct is $5,000 - $2,000 = $3,000 of Deduction

Dale's deductoin under startup expenses = $3,000

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