Corporate Tax Preparation

\t\u0000 CCS\t\u0000 Corporate\t\u0000 Tax\t\u0000 Return\t\u0000 Problem\t\u0000 \u0000 Rachael\t\u0000 Ray,\t\u0000 Paula\t\u0000 Deen\t\u0000 and\t\u0000 Gordon\t\u0000 Ramsay\t\u0000 each\t\u0000 own\t\u0000 one- third\t\u0000 of\t\u0000 the\t\u0000 common\t\u0000 stock\t\u0000 of\t\u0000 Celebrity\t\u0000 Catering\t\u0000 Services,\t\u0000 Inc.\t\u0000 (CCS).\t\u0000 \u0000 CCS\t\u0000 is\t\u0000 incorporated\t\u0000 on\t\u0000 February\t\u0000 2,\t\u0000 2009.\t\u0000 \u0000 It\t\u0000 has\t\u0000 only\t\u0000 one\t\u0000 class\t\u0000 of\t\u0000 stock\t\u0000 outstanding\t\u0000 and\t\u0000 operates\t\u0000 as\t\u0000 a\t\u0000 C\t\u0000 corporation\t\u0000 for\t\u0000 tax\t\u0000 purposes.\t\u0000 \u0000 CCS\t\u0000 caters\t\u0000 to\t\u0000 all\t\u0000 types\t\u0000 of\t\u0000 social\t\u0000 events.\t\u0000 CCS\t\u0000 is\t\u0000 located\t\u0000 at\t\u0000 540\t\u0000 Waverly\t\u0000 Way\t\u0000 Burbank,\t\u0000 CA\t\u0000 91501\t\u0000 Its\t\u0000 employer\t\u0000 ID\t\u0000 is\t\u0000 38- 4743474\t\u0000 CCS's\t\u0000 business\t\u0000 activity\t\u0000 is\t\u0000 catering\t\u0000 food\t\u0000 services.\t\u0000 \u0000 Its\t\u0000 business\t\u0000 activity\t\u0000 code\t\u0000 is\t\u0000 722300.\t\u0000 The\t\u0000 shareholders\t\u0000 also\t\u0000 work\t\u0000 as\t\u0000 officers\t\u0000 for\t\u0000 the\t\u0000 corporation\t\u0000 as\t\u0000 follows:\t\u0000 o Rachael\t\u0000 is\t\u0000 the\t\u0000 chief\t\u0000 executive\t\u0000 officer\t\u0000 and\t\u0000 president,\t\u0000 (SS#\t\u0000 231- 54- 8976).\t\u0000 Her\t\u0000 salary\t\u0000 this\t\u0000 year\t\u0000 is\t\u0000 $200,000.\t\u0000 o Paula\t\u0000 is\t\u0000 the\t\u0000 executive\t\u0000 VP\t\u0000 and\t\u0000 Chief\t\u0000 operating\t\u0000 officer\t\u0000 (SS#798- 56- 3241).\t\u0000 Her\t\u0000 salary\t\u0000 this\t\u0000 year\t\u0000 is\t\u0000 $140,000.\t\u0000 o Gordon\t\u0000 is\t\u0000 the\t\u0000 VP\t\u0000 of\t\u0000 Finance\t\u0000 (SS#\t\u0000 879- 21- 4536).\t\u0000 \u0000 His\t\u0000 salary\t\u0000 this\t\u0000 year\t\u0000 is\t\u0000 $130,000.\t\u0000 All\t\u0000 officers\t\u0000 devote\t\u0000 100%\t\u0000 of\t\u0000 their\t\u0000 time\t\u0000 to\t\u0000 the\t\u0000 business\t\u0000 and\t\u0000 all\t\u0000 of\t\u0000 the\t\u0000 officers\t\u0000 are\t\u0000 US\t\u0000 citizens.\t\u0000 CCS\t\u0000 uses\t\u0000 the\t\u0000 accrual\t\u0000 method\t\u0000 of\t\u0000 accounting\t\u0000 and\t\u0000 has\t\u0000 a\t\u0000 calendar\t\u0000 year- end.\t\u0000 CCS\t\u0000 made\t\u0000 four\t\u0000 equal\t\u0000 quarterly\t\u0000 estimated\t\u0000 tax\t\u0000 payments\t\u0000 of\t\u0000 $20,000\t\u0000 each.\t\u0000 \u0000 Its\t\u0000 tax\t\u0000 liability\t\u0000 last\t\u0000 year\t\u0000 was\t\u0000 $70,000.\t\u0000 \u0000 If\t\u0000 it\t\u0000 has\t\u0000 overpaid\t\u0000 its\t\u0000 federal\t\u0000 tax\t\u0000 liability,\t\u0000 CCS\t\u0000 would\t\u0000 like\t\u0000 to\t\u0000 receive\t\u0000 a\t\u0000 refund.\t\u0000 CCS\t\u0000 paid\t\u0000 a\t\u0000 dividend\t\u0000 of\t\u0000 $30,000\t\u0000 to\t\u0000 its\t\u0000 shareholders\t\u0000 on\t\u0000 November\t\u0000 1.\t\u0000 \u0000 CCS\t\u0000 had\t\u0000 ample\t\u0000 earnings\t\u0000 and\t\u0000 profits\t\u0000 (E&P)\t\u0000 to\t\u0000 absorb\t\u0000 the\t\u0000 distribution.\t\u0000 \u0000 The\t\u0000 following\t\u0000 is\t\u0000 CCS's\t\u0000 income\t\u0000 statement\t\u0000 for\t\u0000 2012:\t\u0000 \u0000 Income\t\u0000 Statement\t\u0000 \u0000 Income\t\u0000 \u0000 Sales\t\u0000 Sales\t\u0000 returns\t\u0000 and\t\u0000 allowances\t\u0000 Net\t\u0000 sales\t\u0000 \u0000 Cost\t\u0000 of\t\u0000 goods\t\u0000 sold\t\u0000 Gross\t\u0000 profit\t\u0000 \u0000 Capital\t\u0000 loss\t\u0000 Dividend\t\u0000 income\t\u0000 Interest\t\u0000 income\t\u0000 Total\t\u0000 income\t\u0000 \u0000 \u0000 Expenses\t\u0000 Salaries- officers\t\u0000 Salaries\t\u0000 and\t\u0000 wages\t\u0000 -\t\u0000 other\t\u0000 Bad\t\u0000 Debt\t\u0000 Meals\t\u0000 &\t\u0000 Entertainment\t\u0000 Repairs\t\u0000 and\t\u0000 Maintenance\t\u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 $470,000\t\u0000 525,000\t\u0000 15,000\t\u0000 3,000\t\u0000 6,000\t\u0000 \u0000 $1,800,000\t\u0000 (5,000)\t\u0000 1,795,000\t\u0000 350,000\t\u0000 1,445,000\t\u0000 ($15,000)\t\u0000 25,000\t\u0000 10,000\t\u0000 $1,465,000\t\u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 1\t\u0000 |\t\u0000 P a g e \u0000 \u0000 \u0000 Property\t\u0000 Taxes\t\u0000 State\t\u0000 Income\t\u0000 Tax\t\u0000 \u0000 Other\t\u0000 Taxes\t\u0000 Rent\t\u0000 Interest\t\u0000 \u0000 Advertising\t\u0000 Professional\t\u0000 Services\t\u0000 Supplies\t\u0000 Depreciation\t\u0000 Employee\t\u0000 benefits\t\u0000 Programs\t\u0000 Other\t\u0000 Expenses\t\u0000 Total\t\u0000 expenses\t\u0000 \u0000 Net\t\u0000 income\t\u0000 before\t\u0000 taxes\t\u0000 \u0000 Federal\t\u0000 income\t\u0000 taxes\t\u0000 Net\t\u0000 income\t\u0000 after\t\u0000 taxes\t\u0000 \u0000 13,000\t\u0000 43,000\t\u0000 44,000\t\u0000 30,000\t\u0000 5,000\t\u0000 52,000\t\u0000 16,000\t\u0000 \u0000 \u0000 \u0000 5,000\t\u0000 10,000\t\u0000 32,000\t\u0000 12,000\t\u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 \u0000 1.281,000\t\u0000 $184,000\t\u0000 [62,000]\t\u0000 $122,000\t\u0000 \u0000 Notes:\t\u0000 1. CCS'S\t\u0000 inventory- related\t\u0000 purchases\t\u0000 during\t\u0000 2012\t\u0000 were\t\u0000 $360,000.\t\u0000 \u0000 It\t\u0000 values\t\u0000 its\t\u0000 inventory\t\u0000 based\t\u0000 on\t\u0000 cost\t\u0000 using\t\u0000 FIFO\t\u0000 inventory\t\u0000 cost\t\u0000 flow\t\u0000 method.\t\u0000 \u0000 Assume\t\u0000 the\t\u0000 rules\t\u0000 of\t\u0000 263A\t\u0000 do\t\u0000 not\t\u0000 apply\t\u0000 to\t\u0000 CCS.\t\u0000 2. Of\t\u0000 the\t\u0000 $10,000\t\u0000 interest\t\u0000 income,\t\u0000 $1,200\t\u0000 was\t\u0000 from\t\u0000 a\t\u0000 City\t\u0000 of\t\u0000 Irvine\t\u0000 bond\t\u0000 that\t\u0000 was\t\u0000 used\t\u0000 to\t\u0000 fund\t\u0000 public\t\u0000 activities\t\u0000 (issued\t\u0000 in\t\u0000 2006),\t\u0000 $1,900\t\u0000 was\t\u0000 from\t\u0000 an\t\u0000 Oceanside\t\u0000 City\t\u0000 bond\t\u0000 used\t\u0000 to\t\u0000 fund\t\u0000 public\t\u0000 activities\t\u0000 (issued\t\u0000 in\t\u0000 2005),\t\u0000 $1,100\t\u0000 was\t\u0000 from\t\u0000 a\t\u0000 US\t\u0000 Treasury\t\u0000 Bond\t\u0000 and\t\u0000 the\t\u0000 rest\t\u0000 was\t\u0000 from\t\u0000 a\t\u0000 money\t\u0000 market\t\u0000 account.\t\u0000 3. CCS's\t\u0000 dividend\t\u0000 income\t\u0000 came\t\u0000 from\t\u0000 Sinful\t\u0000 Desserts,\t\u0000 Inc.\t\u0000 (SD)\t\u0000 \u0000 CCS\t\u0000 owned\t\u0000 10,000\t\u0000 shares\t\u0000 of\t\u0000 stock\t\u0000 in\t\u0000 CC\t\u0000 at\t\u0000 the\t\u0000 beginning\t\u0000 of\t\u0000 the\t\u0000 year\t\u0000 this\t\u0000 represented\t\u0000 10%\t\u0000 of\t\u0000 SD's\t\u0000 outstanding\t\u0000 stock.\t\u0000 4. On\t\u0000 October\t\u0000 1,\t\u0000 2012\t\u0000 CCS\t\u0000 sold\t\u0000 1,000\t\u0000 shares\t\u0000 of\t\u0000 SD\t\u0000 stock\t\u0000 for\t\u0000 $25,000.\t\u0000 \u0000 It\t\u0000 had\t\u0000 originally\t\u0000 purchased\t\u0000 these\t\u0000 shares\t\u0000 on\t\u0000 April\t\u0000 18,\t\u0000 2009\t\u0000 for\t\u0000 $40,000.\t\u0000 \u0000 After\t\u0000 the\t\u0000 sale\t\u0000 CCS\t\u0000 owns\t\u0000 9\t\u0000 percent\t\u0000 of\t\u0000 SD.\t\u0000 5. CCS\t\u0000 wrote\t\u0000 off\t\u0000 $25,000\t\u0000 in\t\u0000 accounts\t\u0000 receivable\t\u0000 as\t\u0000 uncollectible\t\u0000 during\t\u0000 the\t\u0000 year.\t\u0000 6. CCS\t\u0000 regular\t\u0000 tax\t\u0000 depreciation\t\u0000 was\t\u0000 $28,000.\t\u0000 \u0000 None\t\u0000 of\t\u0000 the\t\u0000 depreciation\t\u0000 could\t\u0000 be\t\u0000 claimed\t\u0000 on\t\u0000 1125A\t\u0000 7. The\t\u0000 $5,000\t\u0000 interest\t\u0000 was\t\u0000 from\t\u0000 a\t\u0000 business\t\u0000 loan.\t\u0000 8. Other\t\u0000 expenses\t\u0000 include\t\u0000 $6,000\t\u0000 for\t\u0000 premiums\t\u0000 paid\t\u0000 on\t\u0000 term\t\u0000 life\t\u0000 insurance\t\u0000 policies\t\u0000 for\t\u0000 which\t\u0000 CCS\t\u0000 is\t\u0000 the\t\u0000 beneficiary.\t\u0000 \u0000 The\t\u0000 policies\t\u0000 cover\t\u0000 Rachael,\t\u0000 Paula\t\u0000 and\t\u0000 Gordon.\t\u0000 2\t\u0000 |\t\u0000 P a g e \u0000 \u0000 \u0000 Balance\t\u0000 Sheet\t\u0000 \u0000 Assets\t\u0000 Cash\t\u0000 Trade\t\u0000 and\t\u0000 accounts\t\u0000 receivables\t\u0000 \u0000 Allowance\t\u0000 for\t\u0000 Doubtful\t\u0000 Accounts\t\u0000 Inventories\t\u0000 U.S.\t\u0000 government\t\u0000 bonds\t\u0000 State\t\u0000 &\t\u0000 Local\t\u0000 bonds\t\u0000 Investment\t\u0000 In\t\u0000 Stock\t\u0000 Prepaid\t\u0000 federal\t\u0000 income\t\u0000 taxes\t\u0000 Property,\t\u0000 plant\t\u0000 and\t\u0000 equipment\t\u0000 Accumulated\t\u0000 depreciation\t\u0000 Other\t\u0000 assets\t\u0000 Total\t\u0000 Assets\t\u0000 Liabilities\t\u0000 and\t\u0000 Owners'\t\u0000 Equity\t\u0000 Accounts\t\u0000 payable\t\u0000 Other\t\u0000 current\t\u0000 liabilities\t\u0000 \u0000 Other\t\u0000 Liabilities\t\u0000 Capital\t\u0000 stock\t\u0000 Retained\t\u0000 earnings\t\u0000 Total\t\u0000 Liabilities\t\u0000 and\t\u0000 Owners'\t\u0000 Equity\t\u0000 \u0000 \u0000 Required:\t\u0000 1/1/2012\t\u0000 $180,000\t\u0000 \u0000 560,000\t\u0000 (60,000)\t\u0000 140,000\t\u0000 20,000\t\u0000 120,000\t\u0000 400,000\t\u0000 0\t\u0000 140,000\t\u0000 (50,000)\t\u0000 20.000\t\u0000 $1,470,000\t\u0000 \u0000 $280,000\t\u0000 \u0000 20,000\t\u0000 40,000\t\u0000 400,000\t\u0000 730,000\t\u0000 $1,470,000\t\u0000 12/31/12\t\u0000 $185,000\t\u0000 570,000\t\u0000 (50,000)\t\u0000 150,000\t\u0000 20,000\t\u0000 120,000\t\u0000 360,000\t\u0000 35,169\t\u0000 \u0000 160,000\t\u0000 \u0000 (60,000)\t\u0000 15,831\t\u0000 $1,506,000\t\u0000 \u0000 $240,000\t\u0000 21,000\t\u0000 23,000\t\u0000 400,000\t\u0000 822,000\t\u0000 1,506,000\t\u0000 Complete\t\u0000 Celebrity\t\u0000 Catering\t\u0000 Service\t\u0000 Inc.'s\t\u0000 (CCS)\t\u0000 2012\t\u0000 Form\t\u0000 1120,\t\u0000 1125- A,\t\u0000 1125- E\t\u0000 and\t\u0000 all\t\u0000 related\t\u0000 schedules- Schedules\t\u0000 C,\t\u0000 G,\t\u0000 J,\t\u0000 K,\t\u0000 L,\t\u0000 M- 1,\t\u0000 and\t\u0000 M- 2.\t\u0000 Be\t\u0000 sure\t\u0000 to\t\u0000 attach\t\u0000 schedules\t\u0000 for\t\u0000 any\t\u0000 line\t\u0000 item\t\u0000 which\t\u0000 indicates\t\u0000 one\t\u0000 is\t\u0000 required\t\u0000 on\t\u0000 the\t\u0000 1120.\t\u0000 FORM\t\u0000 4562\t\u0000 is\t\u0000 not\t\u0000 required.\t\u0000 (Do\t\u0000 not\t\u0000 complete\t\u0000 Form\t\u0000 4562\t\u0000 [depreciation\t\u0000 calculation]\t\u0000 since\t\u0000 you\t\u0000 do\t\u0000 not\t\u0000 have\t\u0000 all\t\u0000 the\t\u0000 information).\t\u0000 \u0000 If\t\u0000 any\t\u0000 information\t\u0000 is\t\u0000 missing,\t\u0000 use\t\u0000 reasonable\t\u0000 assumptions\t\u0000 to\t\u0000 fill\t\u0000 in\t\u0000 the\t\u0000 gaps\t\u0000 and\t\u0000 list\t\u0000 those\t\u0000 assumptions\t\u0000 as\t\u0000 an\t\u0000 attachment.\t\u0000 The\t\u0000 forms\t\u0000 schedules\t\u0000 and\t\u0000 instructions\t\u0000 can\t\u0000 be\t\u0000 found\t\u0000 at\t\u0000 www.irs.gov\t\u0000 and\t\u0000 download\t\u0000 the\t\u0000 necessary\t\u0000 forms.\t\u0000 3\t\u0000 |\t\u0000 P a g e \u0000 \u0000