[smalltimeauditor]

From Wiley:

“A corporation may elect to deduct up to $5,000 of organization expenditures for the tax year in which the corporation begins business. The $5,000 amount must be reduced – not below zero – by the amount by which organizational expenditures exceed $50,000. Remaining expenditures must be deducted ratably over the 180-month period beginning with the month in which the corporation begins business.”

A couple things –

One of the questions stated that there was $130,500 in organization costs and began business in March. The answer uses the calculation (10/180 x 130,500) to get $7,250 in organization expenses. I’m confused as this amount is over the $5,000 amount “allowed” – what am I missing?

And for some reason, I keep thinking I seen that the $5,000 number is no longer used but $10,000 – can anybody verify?

And, do you use the same calculations for organization costs for start-up costs?

Thanks in advance.

B - Passed
A - Passed
R - Passed
F - Passed

[Da Bears]

you can EXPENSE $5000 org costs up to $50,000, which at that point the $5000 of expenses is phased out $ per $. so at $55,000 your ability to expense any org costs are phased out. Anything that cant be EXPENSED, is AMORTIZED over 180 months. So in you example you exhausted the ability to EXPENSE any org costs and thus have to amortize the whole amount over a period of 180 months. So 130,500/180=725/month AMORTIZED multiplied by 10 months March-December.

FAR- 8/14/12 91
AUD- 10/16/12 88
BEC- 11/07/12 92
REG- 01/05/13 86
NIU CPA Review

[Da Bears]

I believe they will try and trick you also by throwing in costs that aren't part of organization costs. Aren't org and start up costs the same thing?

FAR- 8/14/12 91
AUD- 10/16/12 88
BEC- 11/07/12 92
REG- 01/05/13 86
NIU CPA Review

[littlenumberrobot]

“And for some reason, I keep thinking I seen that the $5,000 number is no longer used but $10,000 – can anybody verify?”

It was $10K in 2010 only

CA CPA - All because of the journey listed below
-----------------------------------------------------------------------
FAR - 53('10), 8/25/12 79 PASSED!
REG - 66('11), 69('12), 12/06/12 77 PASSED!!
BEC - 58('10), 74('12), 01/05/13 77 PASSED!!!
AUD - 43('11), 66('12), 69('13), 74('13) 7/29/13 85 PASSED!!!!!

(Combinations of Roger, Yaeger, Wiley Book, Wiley TB, & NINJA Notes)

Ethics 90%

[smalltimeauditor]

“I believe they will try and trick you also by throwing in costs that aren't part of organization costs”

I know they throw in costs related to stock offerings which are not considered organizational costs. I thought I remembered seeing a distinction between organization costs and start-up costs though.

Thanks for your explanation.

B - Passed
A - Passed
R - Passed
F - Passed

[Author]

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