Question

Candlewood LLC started business on October 1, and it adopted a calendar tax year. During the year, Candlewood incurred $10,350 in legal fees for drafting the LLC's operating agreement and $5,175 in accounting fees for tax advice of an organizational nature, for a total of $15,525 of organizational costs. Candlewood also incurred $16,600 of preopening advertising expenses and $35,900 of salaries and training costs for new employees before opening for business, for a total of $52,500 of startup costs. The LLC wants to take the largest deduction available for these costs.

If required, round any division to six decimal places and use in subsequent computations. Round your final answers to the nearest dollar.

How much can Candlewood deduct as organizational expenses? As startup expenses?
The LLC may deduct ________ as organizational expenses and _________ as startup expenses.

Answer 1

For the Startup Business the deduction are avaialable in two fold. First for Startup Expenses (generaly it is called as capitalisation expenses ) & Second is Organisational Expenses ( Operational Expenses which will start after running of Business).

In the Given case $ 62850 ($ 10350 as legal fee + $16600 for Preopening Advertising Expenses + $ 35900 of Salaries & Training Cost for New Employees) &

$5175 as Operating Expenses towards Accounting Fees for Tax Advice.

Conclusion. :- The LLC may deduct $62850 as Organizational Expenses and $ 5175 as Startup Expenses.