Question

Q3 (Disallowed Business Expenses)

Paul 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. Assuming all the events occurred in 2017 and Paul chooses to claim deduction/amortization, How much can Paul deduct in 2017, if

1. The new business is a restaurant and Paul did not acquire or start the restaurant.

2. The new business is a restaurant and Paul acquired or started the restaurant on Apr. 1^st, 2017.

3. The new business is in manufacturing industries and Paul did not acquire or start it.

4. The new business is in manufacturing industries and Paul acquired or started in on Apr. 1^st, 2017.

Answer 1

1.In this case deduction shall be taken by writing off entire $7,000 as it relates to samel line of exsiting business.

2.Even in this case entire amount shall be taken as deduction irrespective of the fact that the new business is started or not.

3.Since new business is not started the amount incurred is loss $7,000 and should be taken as deduction in the same year.

4.In this case since business is started expense of $7,000 aretreated as preliminary expenses and can be amortized iver the period of 3 to 5 years.