Question

Jamie started a new business (a corporation) this year. She incurred organizational costs of $10,000 and start-up costs of $53,000. How much of the organizational and start-up costs can be immediately deducted (excluding amounts amortized over 180 months) for the year?

Answer 1

Answer :

In the first year, Start up cost can be deducted is the lower of following -

1. Actual expenses incurred, or

2. $5,000, if the amount of start-up costs exceed $50,000.

If you have additional start-up costs over the $5,000, you can amortize these costs over 15 years (180 months).

Also, a taxpayer may elect to deduct up to $5,000 of organizational costs as an expense in the first year. Any remaining costs must be amortized over a 180 month period, as same in start up cost.

Hence, Jamie can be immediately deducted $10,000 ($5,000 + $5,000) (excluding amounts amortized over 180 months) for the year of the organizational and start up costs.