Question

Alt Partnership, a cash basis calendar year entity, began business on October 1, Year 1. Alt incurred and paid the following in Year 1:

Legal fees to prepare the partnership agreement $23,000

Accounting fees to prepare the representations in offering materials 15,000

Alt elected to amortize costs. What was the maximum amount that Alt could deduct on the Year 1 partnership return?
1) $4,600
2) $5,300
3) $300
4) $0

Answer 1

The maximum amount that Alt Partnership can deduct on the Year 1 partnership return is $0.

Step-by-step explanation:

To calculate the maximum amount that Alt Partnership can deduct on the Year 1 partnership return, we need to consider the expenses incurred. The legal fees of $23,000 and accounting fees of $15,000 are both deductible expenses. However, Alt Partnership elected to amortize costs, which means that these expenses will be deducted over a period of time rather than immediately.

In Year 1, the maximum amount that can be deducted for these expenses would be the amount amortized for that year. Without more information about the amortization schedule, it is not possible to determine the exact deduction amount. Therefore, the maximum amount that Alt could deduct on the Year 1 partnership return would be $0, as provided in option 4.