Iris, a Calendar Year Cash Basis Taxpayer, Owns and Operates

question 26

Multiple Choice

Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida, and wants to expand to other states. During 2018, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations, but not the outlets in Georgia. As to these expenses, Iris should:

• A) Capitalize $14,000 and not deduct $9,000.
• B) Expense $23,000 for 2018.
• C) Expense $9,000 for 2018 and capitalize $14,000.
• D) Capitalize $23,000.
• E) None of the above.

---

Definitions:

Substitute Goods

Products or services that can serve as replacements for each other; when the price of one increases, the demand for the other increases.

Liquid Laundry Detergent

A water-based cleaning agent used for washing clothes, which is specially formulated to dissolve, suspend dirt and soils, and rinse them away, leaving the fabric clean.

Powdered

Reduced to a fine or dust-like particle size through grinding or pulverization.

Demand Curve

A graphical representation showing the relationship between the price of a good and the amount of the good that consumers are willing and able to purchase at each price.