Golden Corporation’s book income before income taxes for the year ended December 31, 2015, was $260,000. The company began business during March 2015 and organizational costs of $130,500 were expensed when incurred during 2015 for financial statement purposes. For tax purposes these costs are being written off over the minimum allowable period. For the year ended December 31, 2015, Golden’s taxable income was
A. $260,000
B. $368,750
C. $383,250
D. $390,500
Answer:C
This answer is correct. A corporation’s organizational expenditures can be deducted ratably over the 180-month period beginning with the month in which the corporation begins business. Here, the $130,500 of organizational expenditures expensed per books must be added back to the $260,000 of book income, and then the proper tax amortization deducted ($130,500 × 10/180 = $7,250), resulting in taxable income of $383,250.