Stanford owns and operates two dry cleaning businesses. he travels to boston to discuss acquiring a restaurant. later in the month, he travels to new york to discuss acquiring a bakery. stanford does not acquire the restaurant but does purchase the bakery on november 1, 2018. stanford incurred the following expenses: total investigation costs related to the restaurant $33,000 total investigation costs related to the bakery 51,400 if required, round any division to two decimal places and use in subsequent computation. round your final answer to the nearest dollar.

deduction available would be $4131.11

Explanation:

Here in the question we have to take out what is the maximum amount that Stanford can deduct for investigating expenses.

First of all it is important to know that the deductions in investigation expenses would be allowed only when Stanford would purchase that business( restaurant or bakery), but here it is told that the Stanford has purchased bakery not restaurant , so therefore there will be no deductions for investigation expenses related to the restaurant .

But since he has purchased bakery the deduction of only $5000 is allowed to him . Here the deduction is taken on basis of dollar for dollar expense in amount which is in excess of $50,000. So the calculation of it would be like this -

amount in excess of $50,000 = $51,400 - $50,000

                                                  = $ 1400

Now subtracting this amount from $5000, to see how much amount would be deducted now and how much would remain for to be amortized over next 180 months.

$5000 - $1400

= $3600   ( amount which will be deductible now)

now subtracting this from $51,400,

$51,400 - $3600 = $47,800

$47,800 is the amount that will be left over to be amortized over next 180 months, as PER MONTH AMOUNT WILL BE

$47,800 / 180

= 265.55

and there are only 2 months left for year to be over, so

$265.55 x 2 = $ 531.11

Now the total deduction would be =

$3600 + $531.11

= $4131.11