FACTS

Viola Holloway and Renee Forrow are the sole equal shareholders in the corporation of Holloway And Forrow Enterprises, Inc. The corporation, which is a retail office supplies and stationery store, began its operations on January 2, 1985 (also date of incorporation). For Federal Income Tax purposes, the corporation is a calendar year taxpayer and uses the Accrual Method Of Accounting. Its Employer Identification Number is 76-1234567, address is 17302 East Meadow Bird Circle Houston, Texas 77086-1747, telephone number is (281) 437-6211, fax number is (281) 734-2116 and E-Mail address is "hollowayandforrowenterprises.com". The business activity code for the corporation is 451140. Viola Holloway is the president of the corporation and its contact person for Federal Income Tax purposes and Renee Forrow is the secretary and treasurer of the corporation. Both are full-time employees of the corporation devoting one hundred percent (100%) of their time to the business and each has an annual salary of $75,000. Viola Holloway's social security number is 678-90-1234 and her address is 1953 Beverly Lane Houston, Texas 77064-3218. Renee Forrow has social security number of 789-01-2345 and her address is 1606 Natalie Court Houston, Texas 77089-4637.

FINANCIAL INFORMATION

During the year of 2019, Holloway And Forrow Enterprises, Inc. reported the following Income and Expenses (including necessary accruals) for Financial Accounting purposes:

Gross Receipts $1,482,000

Sales Returns And Allowances 109,000

Purchases 510,000

Dividends Received From Stock (Not Qualified Dividends)

Investments In Less Than twenty percent (20%)

Owned United States (U. S.) Corporation 80,000

Interest Income:

Taxable Interest 18,000

Tax-Exempt Interest 7,200

Salaries: Officers 150,000

Other Employees 108,000

Repairs And Maintenance 19,300

Rent Expense - Office 84,000

Rent Expense - Equipment 15,500

Payroll Taxes (Federal And State) 19,600

Interest Expense 25,200

Advertising Expense 33,500

Charitable Contributions 48,000

Legal And Professional Fees 18,000

Depreciation Expense 50,000 *

Utilities Expense 27,300

Employee's Health Insurance Premiums 14,200

Entertainment Of Clients 5,000

Officers' Life Insurance Premiums 14,400 **

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* - Based upon Straight-Line Depreciation, a useful life of five (5) years and no salvage value for all assets (see specific assets below).

** - Holloway And Forrow Enterprises, Inc. Is The Designated Beneficiary.

The Holloway And Forrow Enterprises, Inc. owns the following depreciable assets:

ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST

Automobile 2016 Lexus 460 April 1, 2018 $ 50,000

(Five-year Property)

Automobile 2016 Cadillac Seville April 1, 2018 50,000

(Five-year Property)

Furniture And Fixtures May 1, 2018 150,000

(Seven-year Property)

Each automobile was used a total of 18,000 miles during the year of 2019 all which were business miles. The automobiles were not available for personal use during off-duty hours and were used solely by Viola Holloway and Renee Forrow, who both have another vehicle available for personal use. For Federal Income Tax purposes, all of these assets are depreciated using the Modified Accelerated Cost Recovery System (MACRS). Section 179 Deduction was not elected in regards to any of these assets nor was Straight-Line Depreciation used.

BALANCE SHEETS

The Balance Sheets (Financial Accounting) for the Holloway And Forrow Enterprises, Inc. at the beginning and ending of the year of 2019 are as follows:

ASSETS January 1 December 31

Cash $ 36,000 $ 84,000

Trade Notes And Accounts Receivable 96,000 90,000

Inventory (Valued At Cost) * 120,000 100,000

Marketable Securities - Long Term 140,000 170,000

Depreciable Assets (And Land) 260,000 ** 260,000 **

Less: Accumulated Depreciation (65,000) (115,000)

Other Assets (Deposits) 12,000 12,000

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TOTAL ASSETS $ 599,000 $ 601,000

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LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts Payable (Non Recourse) $ 96,000 $ 70,400

Federal Income Taxes Payable 8,600 ?

Notes Payable - Short Term (Recourse) 16,000 24,000

Notes Payable - Long Term (Recourse) 164,000 212,000

Common Stock 10,000 10,000

Retained Earnings (Unappropriated) 304,400 279,890

TOTAL LIABILITIES AND ------------ ------------

STOCKHOLDERS' EQUITY $ 599,000 $ 601,000

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* - The rules of Section 263A of the Internal Revenue Code do not apply to the corporation.

** - Includes $10,000 allocated to Land.

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ESTIMATED TAX PAYMENTS

During 2019, Holloway And Forrow Enterprises, Inc. made the following estimated tax payments:

April 15, 2019 $20,000

June 17, 2019 $16,000

September 16, 2019 $10,000

December 16, 2019 $10,000

The 2018 Federal Income Tax liability for Holloway And Forrow Enterprises, Inc. was $52,800 and no overpayment of 2018 Federal Income Tax is being applied to the 2019 Federal Income Tax liability of Holloway And Forrow Enterprises, Inc.

OTHER INFORMATION

Both shareholders of Holloway And Forrow Enterprises, Inc. are United States Citizens. Holloway And Forrow Enterprises, Inc. does not own directly or indirectly fifty percent (50%) or more of the voting stock in any other domestic corporation and the corporation is not a subsidiary in an affiliated group or a parent-subsidiary controlled group. During the year of 2019, Holloway And Forrow Enterprises, Inc. paid cash dividends of $280,000 ($140,000 to each shareholder) and the corporation did not pay dividends in excess of the corporation's Current Earnings And Profits and Accumulated Earnings And Profits. In addition, Holloway And Forrow Enterprises, Inc. is not a shareholder in any foreign corporation nor has any interest in or a signature or other authority over any financial account in a foreign country. Furthermore, during the year of 2019, the corporation did not receive a distribution from nor was a grantor of, or transferor to, a foreign trust. Moreover, Holloway And Forrow Enterprises, Inc. did not issue publicly offered debt instruments with original issue discount. Finally, the corporation had no Net Operating Losses (NOL's) carryover from prior tax years.

REQUIRED

Prepare the C (Regular) Corporation Tax Return for the Holloway And Forrow Enterprises, Inc. for the tax year of 2019. The following Forms are needed to complete the Tax Return:

Form 1120

Form 1125-A

Form 1125-E

Schedule G (Form 1120)

Form 4562

CHECK FIGURES:

FORM 1120

INCOME (Page 1)

1. Total Income (Line 11): $941,000.

DEDUCTIONS (Page 1)

1. Charitable Contributions (Line 19): $36,566.

2. Depreciation (Line 20): $58,237. (Also Line 22 Form 4562)

3. Total Deductions (Line 27): $611,903.

4. Taxable Income (Line 30): $289,097.

SCHEDULE M-1 (Page 6) *

1. Net Income (Loss) Per Books (Line 1): $255,490.

2. Expenses Recorded On Books This Year

Not Deducted On This Return (Itemize) (Line 5): $28,334.

SCHEDULE M-2 (Page 6)

1. Balance At End Of Year (Line 8): $279,890.