Desi Corporation incurs $5,000 in travel, market surveys, and legal expenses to investigate the feasibility of opening a new coffee house in one of the new suburban malls in town. Desi already owns a similar coffee house downtown.a.What is the proper tax treatment of these expenses if Desi decides not to open the new coffee house?b.What is the proper tax treatment of these expenses if Desi decides to open the new coffee house?c.Assume that Desi Corp is currently in the cleaning services business and incurs the noted expenses because it is considering opening a coffee house. Reconsider your responses to parts a and b.
What will be an ideal response?
| a. | Since Desi is already in a similar business, the entire $5,000 is deductible in the year the |
| b. | Same as a. |
| c. | Since Desi is incurring the expenditures with respect to a possible new line of business, it cannot |
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