Question

Marlo formed a new business this year. The business opened on June 1. Determine the amount of start-up costs Marlo can immediately expense (not including the portion of the expenditures that are amortized over 180 months) this year in the following alternative scenarios. a. She incurred start-up costs of $43,250. b. She incurred start-up costs of $52,450.

Answer 1

Dedduction of start up cost in first year of business is $5000 if person have start up cost up to $50000. If start up cost is more than $50000 then the deduction of $5000 in first year of business is reduced.

a)

If Marlo incurred start up cost of $43250 then she can immediately deduct $5000 as start up cost in the year in which business started operating.

b) If Marlo incurred start-up costs of $52,450, which is in excess of $50000 then deduction in first year is reduced by a start up cost over $50000.

Therefore in this case start up cost deduction in first year of operation is $ 2550 ( $5000 minus $2450).