Emerald Corporation,a calendar year C corporation,was formed and began operations on July 1,2010.The following expenses were incurred during the first tax year (July 1 through December 31,2010)of operations: Assuming a § 248 election,what is the Emerald's deduction for organizational expenditures for 2010?
A)$0.
B)$533.
C)$5,367.
D)$5,500.
E)None of the above.

Question

Emerald Corporation,a calendar year C corporation,was formed and began operations on July 1,2010.The following expenses were incurred during the first tax year (July 1 through December 31,2010)of operations:  Assuming a § 248 election,what is the Emerald's deduction for organizational expenditures for 2010?
A)$0. 
B)$533. 
C)$5,367. 
D)$5,500. 
E)None of the above.

Quizplus · Accepted Answer

Organizational expenses are expenses incurred in creating a corporation, such as legal fees, incorporation fees, and other costs associated with the organization of the corporation.

Emerald Corporation can elect to deduct up to $5,000 of these expenses in the year that the corporation begins operations. However, the deduction is reduced dollar-for-dollar for any organizational expenses in excess of $50,000.

In this case, the total organizational expenses incurred by Emerald Corporation in 2010 are $10,734. Assuming a § 248 election, the deductible amount is limited to $5,000, which means that Emerald Corporation can deduct $5,000 of organizational expenses in 2010.

Therefore, the correct answer is (C) $5,367, which is the remaining amount of organizational expenses after deducting the maximum amount of $5,000.

Emerald Corporation,a Calendar Year C Corporation,was Formed and Began Operations