Grossmont Cuyamaca Community Accountant of George Software Inc Questions


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The accountant for George’s Software, Inc. has approached you for some tax
advice about how to handle some items on the income tax return for the business.
The business is a C corporation. The corporation is a calendar year end, cash basis
taxpayer. The business entertains clients as part of winning new business and
maintaining relationships with existing customers to retain their business and
obtain new contracts. This can involve taking them to a football (NFL) game or
basketball (NBA) game. At other times it could be taking them to a restaurant for
wining and dining. Many customers are located in other states so at times
employees need to travel and stay a night or two near the location of the customers.
In addition, every quarter the CEO takes the top 10 business development
executives to a lunch to brainstorm ideas for winning new contracts.
The accountant needs advice for the following:
1. Can the business deduct the cost of the meals for taking the existing and
potential clients to
a. Are there any limitations on the cost?
b. Are there any documentation requirements?
2. Can the business deduct the cost of taking the clients to the football and
basketball games?
Does it make a difference whether food is provided?
3. Can the business deduct the cost of the meals for the employees when they are
traveling away
from home and not eating a meal with the customers?
4. Can the business deduct the cost of the quarterly lunch for the 2021 tax year?
You research should consider the following (but it is not an exhaustive list):
IRC §162
IRC §274(a)
IRC §274(d)
IRC §274(n)
Regs §1.274-12(a)
Your responsibility:
Prepare 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
You must use proper citation form in your memo. The form
for this communication should be professional and in the form of a tax research
This memo should be whatever length you feel is appropriate to resolve the issues.
We do NOT use a bibliography or list of references in a tax research memo. We do
not include Background in a tax memo.

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