[Anonymous]

Want to ask a question about the following MCQ:

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Brand New, Inc., was organized and began active business on January 2, 2014. Brand New incurred the following expenses in connection with creating the business:

State incorporation fees $ 5,000

Legal fees for drafting the charter 35,000

Printing costs for stock certificates 10,000

Professional fees for issuance of stock 15,000

Broker’s commission on sale of stock 25,000

Expense for the temporary directors 20,000

Total $110,000

What is the maximum amount of organization expense that Brand New may deduct on its 2014 tax return?

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The correct answer is $4,000. I understand that the total org cost is $60,000 but can someone explain to me the rules to follow in order to get from $60K to annual deduction of $4K?

[Missy]

Org costs are deducted over a period of 15 years (180 months). $60k/15 years = $4,000 per year

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[jstay]

mla is correct, usually you can deduct an initial 5,00 from the beginning but that is phased out when your org costs exceed 50,000

[Anonymous]

Got it, thanks a lot!

[Author]

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