Tax Memo:

Mimi has decided to start up a business operating a chain of grocery stores and form a C corporation to conduct the business. She has decided to name the C corporation, Mimi's Grocery Chain of Stores, Inc. ("Mimi's Grocery Chain of Stores"). Mimi's Grocery Chain of Stores will be a calendar year taxpayer.

Mimi contributed cash to the C corporation in exchange for the shares in the C corporation. This is a first time venture for Mimi so she is nervous and excited. Initially there will be one store but she plans to operate a number in the future, hence the choice of name for the entity.

Mimi's Grocery Chain of Stores has leased a building, purchased equipment such as shelving, racks, bins, counters, freezers and registers. There has also been expenses incurred prior to opening the doors for advertising, licensing, training, cleaning, etc.

Mimi's Grocery Chain of Stores would like to understand the amount of the income tax treatment for the expenditures that have been incurred to date. In tax parlance these are often referred to as start-up expenses.

Mimi's Grocery Chain of Stores has not provided the amounts that have been incurred so you should contrast if the start-up expenses incurred were $20,000 vs if the start-up expenses were $70,000.

When researching you may want to consider the following (and please note this is not an exhaustive list just a guide to help you get started):

IRC 195

Regs. Sec. 1.195-1

IRC 248

Make a tax research memo addressing the question that has been raised. Please note that if the tax memo is not in the required format and/or contains very little analysis you will receive a zero (0) for the assignment. All good faith efforts are capable of receiving a minimum of 60% but less than a good faith effort will be awarded zero points.

You will need to support your conclusion using primary sources of tax law. Your textbook is NOT primary authority nor are IRS Publications

You must use proper citation form in your memo (see Chapter 2 for help with citation form). The form for this communication should be professional and in the form of a tax research memo (example posted on Blackboard and a similar example in your textbook).