Cherry Corporation, a calendar year C corporation, is formed and begins business on April 1, 2019. In connection with its formation, Cherry incurs organizational expenditures of $54,000. Determine Cherry Corporation’s deduction for organizational expenditures for 2019.

Explanation:

$5,000 of the organizational expenditures can be immediately expensed. However, the $5,000 limits is reduced dollar for dollar when the total organizational expenditures exceed $50,000. In this case, the expenditures exceed $50,000 by $4,000. Therefore, only $1,000 can be immediately expended. The remaining $53,000 will be amortized for 180 months. The corporation begins business on the 1st of April and Not on the 1st of January, therefore, for the purposes of amortization for 2019, we will not have full 12 months; instead, we will have 9 months (from April to December 31st).($53,00/180) x 9 = $2,650 + $1,000 = $3,650 In each of the following independent situations, determine the corporation’s income tax liability. Assume that all corporations use a calendar year for tax purposes and that the tax year involved is 2019.

Purple Corporation: taxable income: $65,000$7,500 + (25% x ($65,000 - $50,000)) =$11,250 Azul Corporation taxable income: $290,000$22,250 + (39% x (290,000 – 100,000)) = $96,350 Pink Corporation taxable income: $12,350,0003,400,000 + (35% x (12,350,000 – 10,000,000))

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