Question

Maize Corporation (a calendar year taxpayer) was formed on April 1, 2020. Calculate the maximum deduction for organizational expenses for 2020 if these costs were:

Round the per month amount to two decimal places and use in subsequent computations. Round your final answers to the nearest dollar.

Organizational Expenses	Maximum deduction
a. $4,000
b. $24,000
c. $54,000
d. $64,000

Answer 1

Hi there,

Here's my answer to the question asked.

The option is (a) $4000

The maximum corporate expenditure deduction :

Organizational costs

They are any types of costs contained in the actual formation of a corporation, partnership or LLC. (Your accountant or tax lawyer might also refer to these as “incorporation” or “partnership” costs.)

If you spent less than $50,000 total on your business start-up costs, you can deduct $5,000 of those costs immediately, in the year that your business starts operating. Same thing goes for your total organizational costs.

If you spent more than $50,000 on your business start-up costs, your first year deduction decreases by $1 for every dollar you spent over $50,000.