Question

In 2002, its initial year, Business Taxpayer incurred $53,500 in start-up costs Determine the amount of startup costs per c amortization) in 2002

O 5000
O 3500
O 0
O 1500
O 2000

Answer 1

Based on the information provided:

- Business Taxpayer incurred $53,500 in start-up costs in 2002 (the initial year)

- Start-up costs are amortized over a 180-month period for tax purposes

- In the first year, the amortization deduction is prorated based on the number of months in business

Calculation:

Total start-up costs: $53,500

Amortization period: 180 months

Monthly amortization: $53,500/180 = $297

Number of months in business in 2002: 12

Prorated amortization deduction in 2002: $297 x 12 = $3,564

Therefore, the amount of start-up costs allowed as a deduction (per IRC §195 amortization) in 2002 would be $3,564.

The answer is $3,500.