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What amount of r and e expenditures can bacon co deduct

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1. Realizing that bacon toothpaste probably wasn't the best invention, Mr. Bacon's business (Bacon Co.) developed a new product - bacon-scented sunscreen. Bacon Co. spent 6 months (January 2018 - Sept. 2018) and $60,000 developing the sunscreen. The product launched October 1, 2018, and initially it was a huge success. Bacon-scented sunscreen generated over $600,000 in sales in 2018. Sales tapered off quickly, and the sunscreen only generated sales of $10,000 in 2019. It is anticipated that there will be no bacon-scented sunscreen sales after 2019.

What amount of R&E expenditures can Bacon Co. deduct in 2018 if Bacon Co. prefers to accelerate deductions as much as possible?

2. Same facts as previous question except Bacon Co. believes that tax rates will be higher in future years and thus wants to defer some of their R&E expense deduction until 2019 (but not the entire amount). What amount of R&E expenditures can Bacon Co. deduct in 2018 if Bacon Co. elects to amortize R&E expenditures over the shortest allowable period of time beginning on October 1, 2018 (the month Bacon Co. first sells the sunscreen to generate income)?

Reference no: EM132380197

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