TCOs 4 and 5 Iris a calendar year cash basis taxpayer owns a

TCOs 4 and 5) Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida and wants to expand to other states. During 2011, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations but not the outlets in Georgia. As to these expenses, Iris should

capitalize $14,000 and not deduct $9,000.

expense $23,000 for 2010.

expense $9,000 for 2010 and capitalize $14,000.

capitalize $23,000.

None of the above

 

Solution

Since Iris owns and operates TV rental outlets, all of the investigation expenses are deductable as revenueexpense. TotalExpenditureincurred $.23000(14000+9000) $23,000 should be charged off as expense for 2010