Instructions

You received an email from your client. Please read through the email and identify your clientübr>
questions and provide your advice. You need to prepare 1) an internal memo to document your
research findings, and 2) an email draft response to your client.

Please remember that taking any words directly from another person, from ChatGPT, or from
any other source, is considered plagiarism. It is ok to search secondary resources, and it is ok to
consult with your colleagues (just like in real life). But all analysis must be in your own words.
Your tax memo will be uploaded to Canvas with Turnitin plagiarism check. Any instances of
plagiarism will result in a minimum of a zero on the assignment and could result in an F in the
class. As accountants, we have a professional responsibility to act ethically.
Please only cite the primary tax authority in support of your research.

Email from client:
From: Emily Chef <emilychef@foodnetwork.com>
Sent: Wednesday, February 1, 2023, 06:30 PM
To: Tax Advisor <taxadvisor@sdsu.edu>
Subject: Question Regarding New Business

Dear tax advisor,

In 2021, I graduated from Auguste Escoffier School of Culinary Arts, the best culinary
school in the U.S. Early 2022, I started a catering business in my home kitchen in Denver,
Colorado. I provide high-end food to my clients for different venues, such as holiday parties,
weddings, showers, and other family and corporate events. All the food is prepared in my newly
renovated home kitchen. I borrowed $100,000 from the bank to renovate the entire living room
into a commercial kitchen. I had new lighting fixtures and ceilings. In the kitchen, I bought a
new commercial stove, fridge, and dishwasher. My commercial kitchen occupied 700 square feet
of my 2,100 square feet home. It looks stunning! Sometimes, I also use my commercial kitchen
to prepare meals for my family and friends. In my spare time, I created a YouTube channel
mily the Chef to promote myself and my business. You should check out my YouTube
channel. All videos are shot from my new kitchen while I try new recipes or cook for my clients.
Now I have about 10K subscribers. I post new videos about once or twice a week. I bought a
Sony Alpha vlog camera kit and a new MacBook to make and edit my videos. In these videos, I
capture the preparation and food styling process. I had to buy different sets of table linens,
dinnerware, and other decorative items appropriate for various events. I spent about 20 – 25
hours each week on maintaining my channel. As more people are interested in my channel, I
started to receive cookbooks and kitchen products from publishers and manufacturers to promote
their recipes and products. It has been a great year.

Now as I`compiling all my income and expenses, I have some questions for you. Since
my business is operated in my home, do I get to deduct any of the commercial kitchen expenses
as home office expenses? What is the tax treatment for my kitchen appliances? How about the
income and expenses associated with my YouTube channel? Is my YouTube channel my hobby
or is it considered a trade or business? I look forward to hearing from you!
Thank you for your time and assistance.

Best Regards,

Emily Chef