In 2019, Perry, who is not otherwise involved in the gas station business, spends $53,000 investigating the acquisition of a gas station. All costs are ordinary and necessary. Perry decides not to acquire the gas station. What amount can Perry deduct in 2019 for the expenses incurred in investigating the acquisition of the gas station if Perry makes an election to accelerate his deductions as much as possible

Perry and Investigation Expenses:

Perry can deduct the full $53,000.

He can also elect to capitalize the amount, assuming that he is acquiring the gas station, because, according to IRS, "general due-diligence and investigatory expenses incurred to decide whether to enter a new business, and which new business to enter, can be deducted/amortized under Sec. 195."

Explanation:

Facts as per scenario:

Perry is not involved in the gas station business.

Perry spends $53,000 investigating the acquisition of a gas station.

All costs are ordinary and necessary.

Perry does not acquire the gas station.

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return