Welcome Guest. Register Now!  

LinkBack Thread Tools Search this Thread Display Modes
Prev Previous Post   Next Post Next
  #1 (permalink)  
Old 09-28-2012, 04:32 PM
TaxGuru's Avatar
Tax Guru
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,413
Blog Entries: 3
How do taxpayers deduct Formation Costs or Organization costs on the Tax Return?

According to the IRS, Formation Costs or Organization Costs are "incurred in the formation of an entity and include legal fees, filing fees, and related costs to form the Business Entity."

Furthermore, "only those expenses are included as part of Organization Costs that were incurred prior to the original due date of the tax return for the year in which the entity begins business operations."

These costs are not deductible as business expenses and generally required to be capitalized and amortized over a 15 year period.

The IRS has stated that for Partnerships and for Corporations, the amount that can be deducted for Organization costs for the tax year in which it begins business is an amount equal to the lesser of:

a. The amount of organization costs incurred, or

b. $5,000, reduced (but not below zero) by the amount by which the organization costs exceed $50,000.

4. Any organization expenses in excess of the deductible amount are allowed to be amortized ratably over 15 years (180 months) beginning with the month in which the entity.

Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.

Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Start up costs mozart41 Sole-Proprietorship 1 02-18-2011 05:01 AM
Start up Costs/No Income Ladyd Limited Liability Company 1 06-02-2009 10:26 PM
Education Costs Tax Credits Samatg General 0 02-13-2009 09:39 PM
What closing costs can I deduct from a purchase of a rental property? katlee Rental Real-Estate 1 02-11-2008 04:50 PM
Offset Education Costs Samatg General 0 03-15-2007 07:54 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 » Income
 » IRA/Sep
 » Medical
 » Payroll
Forum for CPAs
Financial Planning

» Recent Tax Q&A
No Threads to Display.