If jebsen elected a calendar year for tax purposes. the corporation incurred $25,160 of legal and other professional fees attributable to its formation. The amount of this costs that jebsim can deduct on its first tax return is $5,560.
Tax return can be defined as the money a person remit or pay to the federal government or state government.
Now let calculate the amount that he can deduct from its first tax return using this formula
Amount deducted = Organizational cost + Amortization deduction
Let plug in the formula
Amount deducted = $5,000 + [($25,160 -$5,000)/180 months × 5 months)]
Amount deducted = $5,000 + ($20,160 /180 months × 5 months)
Amount deducted = $5,000 + $560
Amount deducted = $5,560
(Note that the five months begins from August to December 31)
Therefore the deducted amount is $5,560.
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