24. LO.2, 3 The Parakeet Partnership was formed on August 1 of the current year and admitted Morlan and Merriman as equal partners on that date. The partners both contributed $300,000 of cash to establish a children’s clothing store in the local mall. The partners spent August and September buying inventory, equipment, supplies, and advertising for their “Grand Opening” on October 1. The partnership will use the accrual method of accounting. The following are some of the costs incurred during the partnership’s first year of operations. Parakeet uses a calendar tax year.

Legal fees to form partnership $ 8,000 Advertising for “Grand Opening” 18,000 Advertising after opening 30,000 Consulting fees for establishing accounting system 20,000 Rent, at $2,000 per month 10,000 Utilities, at $1,000 per month 5,000 Salaries to salesclerks (beginning in October) 50,000 Payments to Morlan and Merriman for services

($6,000 per month each for three months) 36,000 Tax return preparation expense 12,000 In addition, on October 1, the partnership purchased all of the assets of Granny Newcombs, Inc. Of the total purchase price for these assets, $200,000 was allocated to the Granny Newcombs trade name and logo.

Determine how each of the listed costs is treated by the partnership, and identify the period over which the costs can be deducted, if any.