Martha was considering starting a new business. During her preliminary investigations, she incurred the following expenditures: Salaries $22,000
Travel 18,000
Professional fees 13,000
Interest on a short-term note 4,000
Martha begins the business on July 1 of the current year. If Marth elects \SS 195 trearment, determine her startup expenditure deduction for the current year.

$3,700

Explanation:

The computation of startup expenditure deduction for the current year is shown below:-

According to the section 195, the tax payer is eligible for an immediate deduction of startup expenditure or 5,000 decreased amount that exceeds $50,000

The amount left over of start up expense is eligible for amortization over 180 months starting from the month when the tax payer business started  

Immediate deduction = $5,000 - Start up cost in excess of $50,000

= $5,000 - $3,000

= $2,000

The $3,000 come from

= $53,000 - $50,000

= $3,000

now,

Amortized deduction = ((Total start up cost - Immediate deduction) ÷ 180 months) × Total number of months from beginning July to ending December

= (($53,000 - $2,000) ÷ 180) × 6 months

= 283.33 × 6

= $1,700 approx

and

Start up cost = Salary expenses + Travel expenses + Professional fees

= $22,000 + $18,000 + $13,000

= $53,000

finally

Total deduction in the current year = Immediate deduction + Amortized deductions

= $2,000 + $1,700

= $3,700

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