Tax Memo question. One of your rich clients, Marry, contributed $100,000

| February 25, 2017

Tax Memo question. One of your rich clients, Marry, contributed $100,000 in exchange for 100% of the stock of a new C Corporation. The C Corporation is in the process of developing a new cat food product. Marry anticipates that the new business will need approximately $200,000 in capital during the first two years of its operations before it starts to earn sufficient profits to pay a return on her investment. The first $100,000 of funds can come from one of the following three sources:1. Have the corporation borrow the $100,000 from a local bank. Marry is required to act as a guarantor for the loan.2. Have the corporation borrow $100,000 from the estate of Marry’s ex husband. Marry is the sole beneficiary of the estate.3. Marry lend $100,000 to the corporation from her personal funds.The C corporation will pay an interest rate acceptable to the IRS on any of these loans.The corporation anticipates tax losses of $125,000 during the first two years of operations before it begins to earn a profit.Your tax manager has asked you to evaluate the tax ramifications to Marry of each of the three financing alternatives. ( Keep in mind why a wealthy taxpayer would want to invest in a star-up company.)Prepare a memorandum to the tax manager presenting your findings and making and explaining your recommendation of the best choice. Give the issue questions and recommendation, conclusion. Use proper tax memo format. example: thanks.

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