Question
Anti Virus Inc was formed in early 2019, funded by some venture capitalists who owns 90% of the company stock and the other 10% is
Anti Virus Inc was formed in early 2019, funded by some venture capitalists who owns 90% of the company stock and the other 10% is owned by the top five officers of the Corporation (each hold 2%).
AVI rents thebasement in the Trump Hotel - 1100 Pennsylvania Ave NW Washington, DC 20001 is the address for the headquarters of AVI, which was incorporated in Delaware, on 1/1/2019 and the EIN# is 54-3516549.
AVI somehow was tipped off to the potential for a catastrophic virus that was rumored to be causing early stage havoc in China.They act as a distributor of "tests" to check this virus.They have a number of suppliers in India and Russia for these test packets.AVI buys from their suppliers and sells throughout the USA. Business began to boom. They hold almost NO INVENTORY - they just act as the middleman. They want us to do their tax return for 2019.Here's what they gave me for their 2019 first year of operations:
Financial Statement:
Gross Sales $150 million
Cost of Sales $80 million
Selling and Marketing costs $50 million
Administrative costs $10 million
Interest income $1 million
Dividend Income $2 million (small 10% investment in TRUMP CORP)
Net Profit Pre Tax is $13 million
Tax per Books was 2 million
Net profit after tax was $11 million
Breakdown of expenses:
Selling and marketing costs - Bribes to Local Hospital Officials $1 million
Bribes to 4 US Senators $2 million (each guy got $500,000 for helping AVI become the "leading supplier of virus tests!)
Bribes to the suppliers in India and Russia were $20 million in total! (these suppliers WERE going to sell to the Chinese UNTIL AVI saved the day and got them to supply the USA - it just took a little "payola!").
Fine levied by the US government against AVI was $15 million under the Foreign Corrupt Practice Act for bribing those foreign countries!Ughh!
Advertising costs - $5,000,000
Sales commissions to employees - $1,500,000
Salaries to salespeople - $5 million
Depreciation - 100% bonus depreciation was taken on the SUPER ANTIVIRUS VEHICLES used to deliver the test kits.This depreciation for tax was $2,500,000, the costs of these vehicles.For book purposes $500,000 of depreciation expense was recorded since the company estimated a 5 year life on these assets that cost $2.5 million.
Administration costs: included in the $10 million are
Officer Comp $5 million (each officer got $1 million!)
Fringe benefits - $1 million
Pensions, etc - $1 million
Other salaries $1 million
Entertainment $500,000
Meals $200,000 (assume 1/2 of these meals can be deducted for tax purposes)
Rental of Building - Headquarters $300,000
Donations to various universities (keep those professors happy!) - $200,000
State tax expenses $300,000
Start up costs $180,000
Miscellaneous other costs - $320,000.
Breakdown of Other things?
The interest income of $1 million included $500,000 from an investment in State of California Bonds and another $400,000 from investment in State of New York Bonds.The balance of $100,000 was interest received from an investment into a Russian Bank.
Also, they told me they paid a $5 million dividend - $4.5 to the VC company and the remaining $500,000 was paid $100,000 to each of the 5 officers.Paid on Christmas day - 12/25/2019.The VC company was based in South Korea, by the way.The VC company was funded significantly by Banco De Milano (75% investment; the other 25% of the VC was held by businessmen in Hong Cong), based of course in Italy.
Finally - THEY PAID NO TAX to the FEDERAL GOVERNMENT in the USA - at least not YET!BUT they did pay that state tax I mentioned above! (I think they would be granted a federal tax exemption by their friends in Congress - sort of like a "bail out!")
THAT'S ALL I GOT FOR NOW !
Use this data and the excel spreadsheet (if you want as a guide) to answer and complete the following:
1.Complete the Schedule M-1
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