Business 123A - Spring 2024 Corporate Tax Return and Research Project - Ver. 1.1 Project Facts You (The Paid Tax Preparer) Your name is Jaylen Bui. You are a Tax Manager in the CPA firm of Lily Taylor Tax LLP. Your preparer tax identification number is P0237497. Your Firm (Who You Work for as an Employee) Lily Taylor Tax's address is: 302 Warm Springs Blvd, Fremont, CA 94539 and their phone number is (408) 555-3414. The firm's EIN is: 40-5462560. Your Client Your client is Great Gas, Inc. Their headquarters address is 788 W Campbell Ave, Campbell, CA 95008. Their phone number is (408) 555-7979. Great Gas is a gas station chain located in Santa Clara County. It is a franchisee of C&G, LLC (the franchisor). Great Gas's Employer Identification Number is 45-2378930. It was incorporated in California on 03/15/1995. It is a privately-owned corporation. Corporate Officer #1: The only corporate officer authorized to sign Great Gas's tax returns is Cindy Huang. Her social security number is 908-02-3671, and she is a citizen of the United States. She is the Chief Executive Officer (CEO) of the corporation. She was hired by Great Gas as their CEO back on 10/15/2005. She does not have an employment contract with the corporation.In addition to being an employee of the corporation, Cindy owns 47% of the shares of the corporation. She has owned 47% of the shares since 10/14/2006. She spent 2,568 hours working for the corporation in 2023. She was paid total taxable wages of $1,457,980 in 2023. Her taxable wages were comprised of $780,000 of base wages and $677,980 in bonuses. Cindy's home address 1s 420 Norcross Court, San Jose, CA 95148. Corporate Officer #2 The Chief Financial Officer, Treasurer, and Secretary of the corporation is David Fang. He spent 2,756 hours working for the corporation in 2023. He was paid taxable wages of $750,580 in 2023. David's social security number 1s 600-23-2145 and his home address 1s 230 Overland Way, San Jose, CA 95111. David owns 26% of the shares of the corporation. He has owned 26% of the shares since he was hired on 5/15/2016. He does not have an employment contract with the corporation. He 1s also a citizen of the United States. Neither Cindy nor David worked anywhere else other than at Great Gas in 2023. There are no other officers of the corporation. In addition, the only shares in the corporation are in the form of common stock. There are no preferred shares. Two Other Shareholders There are two other shareholders in the corporation: Michael Lewis and Brian Dehle both U.S. citizens. Neither Michael nor Brian worked for the corporation at all in 2023, as they were just investors 1n the corporation. Michael owned 19% of the shares of the corporation throughout 2023, and Stacy owned 8% during 2023. These two shareholders have each owned the same percentage of the corporation's stock since it was incorporated in 1995. Michael's social security number 1s 346-59-9807, and his home address 1s 3289 Williams Road, San Jose, CA, 95127. Brnan's social security number 1s 395-42-1113, and his home address 1s 1313 N. 2nd Street, San Jose, CA, 95113. General Information on Great Gas Great Gas uses the cash basis of accounting for both financial accounting and tax return purposes. It has a December 31 year-end for both financial accounting and tax purposes. Its 2023 GAAP-based income statement and balance sheet is as follows: 2023 Income Statement Revenues Gross sales: Less: Customer returns Dividends: Bank Account Interest: Interest on U.S. Treasury Bonds: Interest on Lion Corp. Bonds State of Washington Bond Interest: Santa Cruz County Bond Interest Cost of Goods Sold Inventory as of 1/1/23: Inventory purchased during 2023: Inventory as of 12/31/23: Cost of Goods Sold $28.810,260 ($9.500) $41,700 $7,100 $2,100 $780 $370 $2,679 $97.800 $8.190,320 $110.000 $8.178.,120 [Note: All inventory figures are valued based on original cost and using the specific identification method because their computer systems can track the cost of each individual item sold to customers. IRC Sect. 263A (UNICAP) does not apply to the corporation; there were no changes in the method of valuing inventories, and there were no writedowns of subnormal goods 1n 2023.] Expenses (Other than Cost of Goods Sold) (Gas station rents: Headquarters Rent: $ 3,214,589 $ 40,248 Accounting Services: $ 17,432 Office Supplies: $ 8,980 Repairs and maintenance: $9,210 Depreciation (personal property): $ 2,300 Depreciation (real property) $45,000 Mortgage Interest Expense: $ 6,985 Entertainment: $ 49,240 Maeals (at other restaurants, by employees, while out of town $ 4,290 on business trips): Charitable Contributions (Cash) $ 17,780 Wages (Cindy Huang): $ 1,457,980 Wages (David Fang): $ 750,580 Wages (other employees): $ 1,750,240 Franchise / Royalty Fees: $ 193.420 * Three of the employees were certified by a designated local agency as being a member of a targeted WOTC group. Employee #1, Bradon Smith, worked 1,250 hours for the year and was paid 515,700 in wages. He is in within the \"regular\" WOTC group. Employee #2,John Nguyen, worked 410 hours for the year and was paid 56,300 in wages. He is also in within the \"regular\" WOTC group. Employee #3,5cott Mathew, worked 530 hours for the year and was paid 512,300 in wages in 2023. He is certified to be in the long-term family assistance recipients WOTC category. Bradon Smith and John Nguyen were hired and started work on January 1, 2023. Scott Mathew was hired and started work the prior year on January 1, 2022, Looking in the payroll records, Scott was paid 510,000 back in 2022. PAID FAMILY and MEDICAL Leave Plan: 514,500 was paid to various employees under the company's written Family and Medical leave plan, which pays 70% of the employee's regular wages, and all of the requirements under the Paid Family and Medical Leave credit have been met. % all of the franchise fees (royalty payments) are paid to C&G, LLC (the franchisor) and are based on a percentage of sales generated by Great Gas at its stores. C&G's TAX ID is: 66-2347878 and its address is 2850 N. 4th Street, 5an Jose, CA95112. Federal Payroll Taxes: $ 356,056 Fines and Penalties $ 76,091 Sales Tax Expense: $ 2,459,900 Property Taxes: S 46,985 Other Income/Expense Loss on sale of Debt Investments $(2,870) Gain on the Sale of Business Assets' $9.544 NET INCOME $ (Your team will need to calculate the amount of financial accounting book income (or loss)) *Sold some of its State of Washington bonds on 10/28/23 to an unrelated party for $4,780. The Washington bonds that were sold were purchased on 9/14/15 for $7,650. Great Gas received an IRS Form 1099-B showing the sale of these bonds, but the tax basis of these bonds was not provided to the IRS on the 1099-B. *The 59,544 gain on the sale of business assets in 2023 refers to the sale of the gas station cash register computer hardware system (see footnote &6 below for details). 12/31/2022 Year-End Balance Sheet Cash: $ 6,120,340 Inventory: $ 97,800 Land $ 167,000 Building $3.788,000 Stock in Naptha Corp. $ 79,000 U.S. Treasury Stock $ 29,000 State of Washington Bonds $ 39,900 Lion Corp. Bonds $ 12,100 County of Santa Cruz, CA Bonds $ 10,000 Gas station cash register computer hardware system (Cost) $ 240,800 Less: Accumulated Depreciation on Personal Property $ (240,800) Fixed Assets (Personal Property only) Net Book Value $0 - Liabilities Mortgage Payable $ 87,000 Shareholders' Equity Common Stock $ 634.000 Retained Earnings - Unappropriated' $9,622,140 5 The building was a brand new gas station building at 2124 Senter Rd., San lose, CA 95112 that was completed and fully paid for on 12/31/22 for 53,788,000, but not placed in service until July 1, 2023. Purchased for $ 240,800 and placed in service on 2/04/2013. Fully depreciated for financial accounting and tax purposes prior to 2023. Sold for 59,544 on 8/15/23. This was the only fixed asset for the corporation as of 12/31/23 (other than the Land and Building it owns at 9723 Makati Circle in San Jose (which is one of its gas station locations)). ? All retained earnings are unappropriated for Great Gas. 12/31/2023 Year-End Balance Sheet Assets $(Your team will need to Cash: calculate year-end cash) Inventory: $110,000 Land: $ 167,000 Buildings $3.788.,000 Less: Accumulated Depreciation (Real Property) $ (45,000) Net Book Value (Buildings) $3.743.000 Stock in Naptha Corp. $ 79,000 U.S. Treasury Stock $ 29,000 State of Washington Bonds $ 32,250 Lion Corp. Bonds $ 12,100 County of Santa Cruz, CA Bonds $ 10,000 Pre-Paid Federal Inc. Tax $ 3,200,000 New Gas Station POS Computer Hardware System (Cost) $ 320,000 Less: Accumulated Depreciation (Personal Property) $ (2.300) Net Book Value (Personal Property) $ 317,700 Liabilities None $0 Shareholders' Equity Common Stock $ 634,000 Retained Earnings Unappropriated (Your team will need to calculate year-end retained earnings) # 2023 Federal estimated taxes were paid in 2023. They were paid in four installments as follows: $800,000 on 4/7/23; 800,000 on 6/3/23; S800,000 on 9/10/23 and 5800,000 on 12/3/23. Purchased and placed in service on 7/30/23. Great Gas System elects to expense only the first $200,000 of the cost of this asset under IRC Sect. 179