Question

Peter owns and operates two clothing businesses. He travels to Texas to discuss acquiring a restaurant. Later in the month, he travels to San Francisco to discuss acquiring a bakery. Peter does not acquire the restaurant but does purchase the bakery on November 1, 2018.

Peter incurred the following expenses:

Total investigation costs related to the restaurant	$33,250
Total investigation costs related to the bakery	52,300

If required, round any division to two decimal places and use in subsequent computation. Round your final answer to the nearest dollar.

What is the maximum amount Stanford can deduct in 2018 for investigation expenses?

Answer 1

Answer:

Stanford can deduct in 2018 for investigation expenses = $3251.11

Calculation:

Maximum deduction can be $5,000. It is the reduced dollar for the expenses above $50,000

= $52,300 - 50000

= $2,300 deductions.

= $5,000 - $2,300

= $2,700 deductions

= $52,300 - $2,700

= $49,600 is the remaining expenses which can be amortized over 180 months till the start of starting month of business.

= $49,600/180

= $275.55 per month

Deduction for 2 months

= $275.55*2

= $551.11

Total deductions

= $2,700 + $551.1

= $3251.11

Note:
$33,250 is not deductible as he has not purchased the restaurant.

Whole of $52,300 is not deductible as he has started the business.