CCS Corporate Tax Return Problem

Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events.

CCS is located at 540 Waverly Way Burbank, CA 91501

Its employer ID is 38-4743474

CCSs business activity is catering food services. Its business activity code is 722300.

The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000.

Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000.

Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000.

All officers devote 100% of their time to the business and all of the officers are US citizens.

CCS uses the accrual method of accounting and has a calendar year-end.

CCS made four equal quarterly estimated tax payments of $21,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund.

In 2014, the company made a large charitable contribution. $20,000 of that contribution exceeded the amount deductible for 2014 and was carried forward to 2015.

CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. The following is CCSs income statement for 2015:

Income
Sales		$2,000,000
Sales returns and allowances		(5,000)
Net sales		1,995,000
Cost of goods sold		420,000
Gross profit		1,575,000
Capital loss		($25,000)
Dividend income		24,000
Interest income		12,000
Total income		$1,586,000
Expenses
Salaries-officers	$470,000
Salaries and wages other	525,000
Bad Debt	15,000
Charitable Contributions	30,000
Meals & Entertainment	24,000
Repairs and Maintenance	6,000
Property Taxes	13,000
State Income Tax	23,000
Payroll Taxes	75,000
Equipment Rent	20,000
Interest	5,000
Advertising	32,000
Professional Services	15,000
Supplies	4,000
Depreciation	10,000
Employee benefits Programs	32,000
Other Miscellaneous Expenses	14,000
Total expenses		1.313,000
Net income before taxes		$273,000
Federal income taxes		[87,100]
Net income after taxes		$185,900

Notes:

CCSS inventory-related purchases during 2015 were $430,000. It values its inventory based on cost using FIFO inventory cost flow method. Assume the rules of 263A do not apply to CCS.

Of the $12,000 interest income, $2,000 was from a City of Irvine bond that was used to fund public activities (issued in 2006), $1,500 was from an Oceanside City bond used to fund public activities (issued in 2005), $1,500 was from a US Treasury Bond and the rest was from a money market account.

CCSs dividend income came from Sinful Desserts, Inc. (SD) CCS owned 10,000 shares of stock in CC at the beginning of the year this represented 25% of SDs outstanding stock.

On October 15, 2015 CCS sold 1,000 shares of SD stock for $25,000. It had originally purchased these shares on April 18, 2009 for $50,000. After the sale CCS owns 22.5 percent of SD.

CCS wrote off $4,000 in accounts receivable as uncollectible during the year.

CCS regular tax depreciation was $29,000. None of the depreciation could be claimed on

1125A.

The $5,000 interest expense was from a business loan.

Other expenses include $4,000 for premiums paid on term life insurance policies for which CCS is the beneficiary. The policies cover Rachael, Paula and Gordon. The rest are miscellaneous ordinary and necessary expenses.

Assets	1/1/2015	12/31/15
Cash	$180,000	$224,300
Trade and accounts receivables	560,000	620,000
Allowance for Doubtful Accounts	(60,000)	(71,000)
Inventories	140,000	150,000
U.S. government bonds	20,000	20,000
State & Local bonds	120,000	120,000
Investment In Stock	400,000	350,000
Property, plant and equipment	140,000	160,000
Accumulated depreciation	(50,000)	(60,000)
Other assets	20.000	65,100
Total Assets	$1,470,000	$1,578,400
Liabilities and Owners' Equity
Accounts payable	$280,000	$240,000
Income Taxes Payable	0	8,500
Other current liabilities	20,000	21,000
Other Liabilities	40,000	23,000
Capital stock	400,000	400,000
Retained earnings	730,000	885,900
Total Liabilities and Owners' Equity	$1,470,000	1,578,400

Required:

Complete Celebrity Catering Service Inc.s (CCS) 2015 Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required on the 1120.

FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information).

If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment.