[ncjm304]

NINJA Question –

I just did some NINJA MCQs from REG Chapter 3. I had a few questions about start up costs and organizational expenses, but I did not see that covered in Chapter 3. I tried to look through the other tax chapters and could not find it there either. I have other materials I can read from to read into more, but was just curious if anybody knew where it was in the NINJA books?

Thanks!

AUD- 71,79
BEC- 72,77
FAR- 83
REG- 63,71,83

DONE!

[makiu]

@Michael.

I came across with this mc question that would be helpful to answer your question with regard code section 248

In computing the non-separately stated income or loss of an S corporation, which of the following items can be deducted by the corporation?

A. Interest expense on investments.

B. Charitable contributions.

C. Intangible drilling and development costs that the corporation elects to expense.

D. Corporate organizational costs.

Answer (D) is correct.

The computation of an S corporation’s non-separately stated (ordinary) income or loss is governed by Sec. 1363(b). That section states that Sec. 248 applies to S corporations. Sec. 248 allows corporate organizational costs to be amortized over a period of not less than 180 months. Up to $5,000 of organizational expenses may be deducted in the taxable year in which the business begins. The $5,000 is reduced by the amount by which the cumulative costs of the organizational expenditures exceed $50,000. After incurring $55,000 of organizational expenses, no costs are deductible, and all costs are amortized over 180 months. The $5,000 deduction may be taken for expenditures but all of the expenditures incurred during the taxable year are considered when computing the phase-out.

[Author]

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