Powell Inc

question 98

Multiple Choice

Powell Inc.was incorporated and began operations on October 1 and adopted a calendar year for tax purposes.Powell paid $4,200 to the attorney who handled the corporate formation.Which of the following statements is true?

• A)If Powell capitalized the $4,200 payment for financial statement purposes,it must also capitalize it for tax purposes.
• B)Powell can deduct the $4,200 payment on its first tax return.
• C)For tax purposes,Powell must capitalize the $4,200 organizational cost and amortize it over 15 years.
• D)None of the above is true.

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Definitions:

Holder in Due Course

A party who has acquired a negotiable instrument in good faith and for value, and thus has certain rights to collect the instrument free of many defenses.

Negotiated

Involves parties coming together to discuss and settle on the terms of an agreement, contract, or settlement through dialogue and compromise.

Notice

A formal communication or announcement, often legal in nature, that informs a person or entity about an action, decision, or condition that affects their rights or duties.

Holder in Due Course

A legal term for someone who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be asserted against the original payee.