Tax BenefitsTAX RESEARCH MEMO #1 CASE INFORMATION – AC312
On May 17, 2021, Chandler and Monica Bing created and began operating Bing Bakery, Inc. (Bing). Bing sells various baked goods online to customers throughout the U.S. Bing’s mission is to provide high quality baked goods to customers in a convenient manner without sacrificing taste and freshness. Monica leads the operations side of the business as the head chef, and Chandler leads the administrative side of the business as the CEO of the company.
Prior to starting the business, Bing incurred the following expenses:
• Legal fees to create the corporation $10,000
• Accounting fees to assist with business registrations, etc. 25,000
• Registration fees paid to the state of incorporation 1,000
• Recipe development and testing 8,000
• Development of business plan 5,000
Since these costs were incurred prior to the start of the business operations, the owners are unsure how to treat the costs for tax purposes when filing Bing’s Form 1120 for 2021. As a result, they have asked you to provide guidance to them in the form of a tax research memo.