Hello,
This is my homework assignment. However it is not a graded hw assignment. This is for study purposes only. Can I please get some detailed answers please.
Here it is:
T is thinking about starting or acquiring a new business. T is currently in the pie making business where his company bakes special order pies for parties and for grocery stores. The grocery store pies are mass produced as opposed to the special order pies. T thinks that his business expertise will lend itself to a catering business. He has spent considerable time looking into the business, to determine whether he should buy an existing business or start his own. He has incurred legal fees from lawyers, and accountant’s fees for various advice with respect to the new venture. The legal and accounting fees to date have been $15,000. T decides to start his own business and begins to work on getting the business up and running. He incurs the following costs. He loans some of his own pie staff to the new business in order to get it going.
Legal/accounting (same as above) $15,000
Incorporation costs $4,000
Loaning his pie staff personnel time $10,000
Purchasing of catering equipment $50,000
Truck purchase $25,000
Determine what to do with each of the above costs. Support your conclusions as to whether you think that T can deduct the costs or must capitalize them. Determine the amount you think that T can deduct during 2009, and how much, if any, he must deduct in future years. Presume that all of the activities and costs were incurred during 2009. (10 points)
a. Deductions; Legal/accounting, Incorporation cost
b. Capitalize; Equipment, and Trucks
