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PC:3-34

Date	Expenditure	Amount
January 30	Travel to investigate potential business site	$1,000
May 15	Legal expenses to draft corporate charter	2,500
May 30	Commissions to stockbroker for issuing and selling stock	4,000
May 30	Temporary directors' fees	3,100
June 1	Expense of transferring building to Aurora	1,500
June 5	Accounting fees to set up corporate books	3,000
June 10	Training expenses for employees	6,500
June 15	Rent expense for June	3,620
July 15	Rent expense for July	3,620

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Aurora Corporation incorporates on January7, begins business on July10, and elects to have its initial tax year end on NovemberNovember 3030. AuroraAurora incurs the following expenses between January and NovemberNovember related to its organization during the currentyear:

Requirement

a.	What alternative treatments are available for AuroraAurora's expenditures?
b.	What amount of organizational expenditures can AuroraAurora Corporation deduct on its first tax return for the fiscal year ending NovemberNovember 3030?
c.	What amount ofstart-up costs can AuroraAuroraCorporation deduct on its first taxreturn?

PC 3-39

DermaDerma Corporation reports the following results for the currentyear:

Gross profits on sales	$200,000
Dividends from less-than-20%-owned domestic corporations	160,000
Operating expenses	198,000

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s

a.	What is DermaDerma's taxable income for the currentyear, assuming qualified production activities income is $1,000?
b.	How would your answer to Part a change if DermaDerma's operating expenses are instead $208,000, assuming qualified production activities income is zero ornegative?
c.	How would your answer to Part a change if DermaDerma's operating expenses are instead$287,000, assuming qualified production activities income is zero ornegative?
d.	How would your answers to Partsa, b, and c change if DermaDermareceived$120,000of the dividends from a20%-owned corporation and the remaining $40,000from aless-than-20%-owned corporation?

PC:3-43

DeltaDelta Corporation reports the following results for the currentyear:

Gross income from operations	$270,000
Dividends from less-than-20%-owned domestic corporations	105,000
Operating expenses	145,000
Charitable contributions	21,000

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Inaddition, DeltaDeltahas a $51,000 NOL carryover from the preceding taxyear, and its qualified production activities income is $125,000.

a.What is Delta'sDelta'staxable income for the currentyear?

What carrybacks or carryovers are available to other taxyears?