Tax Memo Mimi Cupcake

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Memorandum To: File From: Date: NOVEMBER 11, 2013 Re: MIMI’S CUPCAKES FACTS Mimi Charpentier is a successful owner of a three cupcakes stores located in Las Vegas. She operates her business as a sole partnership. Her business operates under cash basis since 2004. One of her cupcakes stores is slightly larger than the others. The larger store is considered the main location of the business which is the site of kitchen and the loading dock. Cupcakes trucks daily pick up merchandises and supplies from this main store to have them deliver. Mimi’s attorney, Gloria Willis, encouraged her to incorporate the business as a corporation. After many years, Mimi decided to take Gloria’s idea of forming a corporation. It was anticipated the business would be incorporated by July 1, 2013. Mimi decided to distribute the shares as fallow: * Mimi Charpentier 60% * Nancy Charpentier (Mimi Charpentier’s daughter) 20% * Joan Price (CFO) 20 % After an interview with the three shareholders, it was noted that Mimi’s life expectancy it was about two more years after formatting the corporation. Mr. Price (CFO) will remain in charge of the corporation in after Mimi’s death. Neither Nancy nor Joan, has predicted to open a new location, or to expand the business outside Las Vegas. The proprietorship does not have any debts its trade payables and receivables are disposed of in a timely fashion. Due to corporate gross receipts, Mimi’s Cupcakes will not have to change from using cash basis of accounting. ISSUE AND CONCLUSION 1 Due to tax advantages; Mimi Charpentier would like recommendations about which assets to transfer to the new corporation. Nancy Charpentier also requests information about assets basis, and the effect corporation may have on sale or use of the assets. Two different recommendations are given to Mimi Charpentier to consider for

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