Cherry Corporation a calendar year C corporation is formed a

Cherry Corporation, a calendar year C corporation, is formed and begins business on 2/1/2017. In connection with its formation, Cherry incurs organizational expenditures of $54,400.

Round the per month amount to two decimal places. Round your final answer to the nearest dollar.

Determine Cherry Corporation’s deduction for organizational expenditures for 2017.
$

Solution

Cherry Corporation’s deduction for organizational expenditures for 2017 is computed as follows:

Immediate Expense [$5000 – ($54400 - $50000)]

$600

Amortization [($54400 - $600) ÷ 180] × 11 months in tax year

$3288

Total Deduction for Organizational Expenditures 2017

$3888

Note: For organizational expenditures incurred by a corporation, the corporation has an option to expense up to $5,000 immediately. However, this $5,000 are reduced dollar for dollar by the amount the total organizational expenditures incurred exceed $50,000.