Question

Toby, owner of a cupcake shop in New York, is considering opening a similar business (i.e., a cupcake shop) in Phoenix. After spending $4,200 investigating such possibilities in Phoenix, Toby decides against opening the store. What is the maximum amount of deduction for the current year attributable to these expenditures?A) $0B) $420C) $840D) $4,200

Answer 1

D) $4,200

Step-by-step explanation:

the business investigation expenses of a taxpayer who is already engaged in a similar trade or business are fully deductible in the year incurred regardless of whether or not the taxpayer goes into a new business.

Therefore, the maximum amount of deduction for the current year is

$4,200.