Question

Kim owns and operates a restaurant on the north side of Indianapolis. She is considering opening a day care center on the south side of town and incurs $10,400 of investigation expenses. In July of the current year, Kim opens the day care center. How much of the investigation expenses can Kim deduct in the current year?

Answer 1

Check the explanation

Step-by-step explanation:

• During the initial year of investigation, the cost of 5,000 dollars can be claimed as the subtraction and in addition to that expenses over 5,000 dollars would also be claimed as the subtraction over the period of 180 months.

Deduction expense will be lesser of

• $5,000 or

• The Actual expenses that were incurred which is $10,500.

So $5,000 is lesser amongst the above 2 and in adding together to that extra subtraction will be:-

($10,500- $5,000) / 180 ) * 6 months = $180

• Since the Day Care Center begins from July, so we’ve calculated for six months deduction and it will be From July to December, which will be addition to $5000. So the Total deduction is $5,180. ( $5,000 + $180)