| Course | ACC 455 Corporate Taxation (ACC/455) |
|---|---|
| Week | 5 |
| Paper type | Tax research memo |
| Length | about 1,022 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 455 Week 5
Can the Marina Deduct Its Customer Cruise? A Tax Research Memo on Entertainment, Business Meals and the Public-Availability Exception, With a Note on Why Congress Drew the Line
[Student Name]
University of Phoenix
ACC/455: Corporate Taxation
Week 5 Assignment
[Instructor Name]
[Date]
The marina, its event and all figures are composites written for a model paper; the law is stated from the sources listed as of the 2025 tax year.
MEMORANDUM
To: Tax manager. From: Staff accountant. Re: Deductibility of the customer appreciation cruise, 2025 tax year.
Facts
A composite corporation operates a marina and sells new and used boats. In August 2025 it held a customer appreciation cruise on its 60-foot demonstration yacht for about 120 guests, all boat owners who store their boats at the marina or recent buyers, plus a few prospects invited by the sales staff. Invitations were sent by mail and email; the event was not advertised to the public. Costs were catering of $9,600, invoiced separately from other costs, an open bar of $3,400, invoiced by the caterer on a separate line, a band for $2,000, wages for the captain and two crew for the evening of $2,200, fuel of $1,800 and printed invitations of $400. The sales manager and the owner attended and spoke with guests about new models and service plans. The corporation deducted the full $19,400.
Issue
How much of the cost of the customer cruise is deductible for 2025?
Authority
Section 274(a) disallows any deduction for an activity of a type generally considered to be entertainment, amusement or recreation, and for a facility used in connection with such an activity (26 U.S.C. § 274). Since 2018, the former exception for entertainment directly related to or associated with the active conduct of business no longer applies. The regulations adopt an objective test: whether an activity is entertainment depends on whether it is generally considered entertainment, not on the taxpayer's business purpose (Treas. Reg. § 1.274-11).
Food and beverages are treated separately. The regulations allow a deduction for business meals if the expense is not lavish, the taxpayer or an employee is present and the food is provided to a current or potential business customer or similar contact, subject to the 50% limit of Section 274(n). When food and beverages are provided at an entertainment activity, they are deductible under these rules only if purchased separately from the entertainment or stated separately on a bill or invoice (Treas. Reg. § 1.274-12).
Section 274(e) lists exceptions. Among them, expenses for goods, services and facilities made available to the general public are not subject to the disallowance, and under Section 274(n)(2) they are also exempt from the 50% limit. IRS guidance for taxpayers summarizes these rules (Internal Revenue Service, 2025) but is not itself authority.
Analysis
The cruise is entertainment, whatever the sales staff hoped to gain from it. An evening cruise on a yacht with a band and an open bar is the kind of activity generally considered entertainment or recreation. The corporation's sales purpose does not change the result under the objective test. The costs of the band, the crew's wages for the event, the fuel and the invitations are costs of the entertainment activity and are not deductible.
The catering and bar charges are food and beverages. They were invoiced separately from the other costs, the owner and sales manager were present, the guests were current and potential customers and the menu was a buffet of ordinary cost per guest, not lavish. They meet the requirements for business meals and are deductible at 50%. The deductible amount is 50% of $13,000, or $6,500.
Other Positions Considered
Two arguments for a larger deduction were considered and rejected. First, the corporation could argue that the cruise was a product demonstration, since guests rode on a model the dealership sells. A sea trial for a buyer considering a specific boat is an ordinary selling expense, not entertainment, because it is not generally considered a leisure activity. But an evening event for 120 guests with a band and an open bar does not look like a sea trial under the objective test, and the regulations do not allow a taxpayer to escape the rule by pointing to its business motive. Second, the invitations could be described as advertising, which is deductible. They were, however, addressed only to invited guests and promoted a single entertainment event, so they are part of the event's cost. If the marina mailed a general catalog or advertised its services to the public, that cost would remain deductible.
The Public Exception
The general public exception does not apply. The guests were invited customers and selected prospects, and the event was not open or advertised to the public. A private event for customers is not made available to the general public.
Conclusion
Of the $19,400 deducted, $6,500 is allowable. The remaining $12,900 should be added back, increasing taxable income and federal tax by about $2,709 at the 21% rate. The return should be prepared on that basis.
Recommendation
If the marina wants next year's event to be deductible, it could hold an open dock day advertised to the public, with free food, boat tours at the dock and representatives from engine and electronics makers. Costs of an event genuinely made available to the general public would fall under the exception and be fully deductible, including food. A private cruise for selected customers, however valuable for sales, will remain largely nondeductible. Records should be kept of how any event was advertised.
A Note on Tax Policy
Congress eliminated the entertainment deduction in its 2017 tax legislation, effective for amounts paid after that year. The change can be judged by the usual criteria. On equity, it treats businesses more alike, since high-income owners and executives had often enjoyed deductible entertainment that other taxpayers paid for with after-tax dollars. On efficiency, the old rule subsidized spending on boxes, golf and cruises that partly served personal consumption. On simplicity, the new rule removed a subjective test of business purpose but added a line between food and entertainment that requires separate invoices, as this event shows. Slemrod (1990) emphasized that practical tax design must weigh such administrative costs against a rule's theoretical merits. Here the rule is simpler to apply than its predecessor, but its dependence on how a caterer writes an invoice is an odd place to draw a line.
References
Internal Revenue Service. (2025). Travel, gift, and car expenses (Publication 463). https://www.irs.gov/publications/p463
Slemrod, J. (1990). Optimal taxation and optimal tax systems. Journal of Economic Perspectives, 4(1), 157-178. https://doi.org/10.1257/jep.4.1.157
Treas. Reg. § 1.274-11 (2020).
Treas. Reg. § 1.274-12 (2020).
26 U.S.C. § 274 (2018).
What the ACC 455 Week 5 instructions ask
ACC 455 Week 5 typically asks students to research a tax question and write a memo, and often to discuss tax policy. The research portion usually requires stating the facts, identifying the issue, finding and citing the controlling authority, such as the Code, regulations, rulings and cases, applying the law to the facts and reaching a conclusion with any recommendation. The policy portion may ask students to evaluate a provision or proposal using criteria such as equity, efficiency, simplicity and revenue. Some prompts supply the facts; others ask students to choose a question. The memo should cite authority precisely in APA style and distinguish primary authority from secondary sources such as IRS publications.
How this ACC 455 Week 5 example is built
A marina's customer cruise raises a question that looks simple but requires careful reading of a statute, its regulations and an exception. The memo follows the standard research format so a reviewer can check each step: facts, issue, authority, analysis, conclusion and recommendation. The analysis splits the event into its costs, since food and drink are treated differently from the boat, crew and band. The public-availability exception is tested against the facts and found not to apply, which leads to a practical recommendation for restructuring next year's event. The policy section then asks whether the line Congress drew in 2017 serves the goals of a good tax, giving the paper its second purpose.
ACC 455 Week 5 grading rubric: where the points go
Instructors generally grade the research memo on correct identification of the issue, use of the right authority in the right order, accurate application to each fact and a clear conclusion. Credit depends on citing the Code and regulations, not only a publication, and on separating costs that the rules treat differently. Testing exceptions shows thoroughness. A useful recommendation for the client adds value. In the policy portion, faculty look for recognized criteria applied to the specific rule rather than general opinions. Memo format, concise writing and precise citation of statutes and regulations, with scholarly sources for the policy discussion, complete the evaluation.
ACC 455 Week 5 help: mistakes to avoid
A common weakness in ACC 455 Week 5 memos is citing only IRS publications or websites. Publications explain the law but are not authority, so go to the Code section and the regulation. Another is treating the whole event as either deductible or not; separate the costs, because meals and entertainment follow different rules. Students also skip exceptions, which is often where the answer changes. State the facts that matter and those that are assumed. Keep the conclusion short and definite, with any uncertainty explained. In the policy section, use criteria rather than opinion and consider who bears the cost of the rule. Finally, give the client a practical, specific next step.
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ACC 455 Week 5 questions, answered
What does ACC/455 Week 5 usually ask for?
It usually asks for a tax research memo that identifies an issue, cites and applies the controlling authority and reaches a conclusion, often with a discussion of tax policy.
Where can I find a free ACC 455 Week 5 sample paper?
The marina research memo on this page, covering the entertainment rule, meals and the public-availability exception with margin notes, can be read without charge. Send us the issue your course assigns and we will write an opening memo free.
Are entertainment expenses deductible after 2017?
Generally no. Section 274 disallows deductions for activities generally considered entertainment, amusement or recreation, although food and beverages bought separately at such an event may be 50% deductible.
What is the general public exception in Section 274?
Expenses for goods, services and facilities made available to the general public, such as an open community event, are not subject to the entertainment disallowance or the 50% meals limit.
What sources count as authority in tax research?
The Internal Revenue Code, Treasury regulations, revenue rulings and procedures and court decisions; IRS publications are helpful guidance but not authority.
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