Fun Fair of Ventura, Inc. (FF) is organized as a corporation and is taxed as a “C” corporation with a calendar year-end. FF owns and operates an amusement park in Oxnard, California. Oxnard’s weather allows FF to operate year-round. FF’s address, employer identification number (EIN), and date of incorporation are as follows:

Fun Fair of Ventura, Inc.

50 Boardwalk

Oxnard, California 93030

EIN- 36-4385943

Date Incorporated- July 23, 1997

FF has been at the same address and has not changed its same since inception.

FF has only common shares issued (no preferred stock).

FF is owned by 86 shareholders. The majority owner of FF is large private equity firm based in San Jose, California called Amusement Ventures, LLC (AV). AV’s address, employer identification, and other information are as follows:

               Amusement Ventures, LLC

               675 Shady Wood Boulevard

               San Jose, California 95101

               EIN- 54-8293213

AV is taxed as a partnership for federal tax purposes. AV is organized in California. It owns 30% of the voting stock of FF directly. No other person or entity owns directly or indirectly owns more than 5% of the voting stock of FF.

FF uses the accrual method of accounting. FF is not a subsidiary nor is it in an affiliated group with any other entity. FF is not audited by a CPA firm. It does, however, use GAAP-based financial statements. FF has never had a restatement of its income statement.

In addition, FF reported the following information for the current year:

FF did not pay dividends in excess of its current and accumulated earnings and profits.

None of the stock of FF is owned by non U.S. persons

FF has never issued publicly offered debt instruments.

FF is not required to file a Form UTP

FF made payments that required it to file federal Form(s) 1099. These Forms 1099 were filed timely by FF.

During the year, none of the shareholders of FF changed.

FF has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax deferred transaction.

FF did not receive any assets in a Section 351 transfer during the year.

All of the questions on Schedule B, Form 1120 should be answered with “no” for the year.

Additional information:

On August 1, FF was notified by its legal counsel that FF was being sued by a former employee regarding her termination of employment from FF. As of December 31, CY (current year), no legal settlement had been reached. However, legal counsel has advised FF that the settlement amount of $190,000 is probable (although the number could be slightly more or less) and the law firm believes a confidential settlement will be executed by both parties sometime in February of next year. FF accrued this expense on its financial statements.

FF maintains a portfolio of tax-exempt securities (none of which are private activity bonds) and publicly-traded stocks as a measure to provide immediate liquidity if needed (none of these investments is debt financed). All of these securities originate from less than 20% owned domestic corporations.

During the year, FF upgraded its main attraction. From inception until this year the Rapid Coaster had been the main attraction. However due to safety, crowd appeal, and other factors, FF disposed of the Rapid Coaster on March 1 and purchased a new attraction known as the Vomitnator. The Rapid Coaster cost $2,000,000 and was put in service on September 1, 2001. The Rapid Coaster was fully depreciated for book, regular tax, and AMT tax depreciation purposes.

The Vomitnator was installed and rendered operational on March 1. The Vomitnator cost $6,000,000.

FF’s regular tax depreciation for the year is correctly calculated as $1,112,499 before considering the 2012 addition of the Vomitnator . FF’s AMT depreciation for the year is correctly calculated as $744,977 before considering the 2012 addition of the Vomitnator . FF does not want to claim any current year bonus depreciation. Further, FF wants to depreciate the Vomitnator using the general depreciation method system “GDS” for regular tax purposes.

FF officer information for the year is as follows (compensation amounts included in total wages on the income statement for all employees):

Name	Social security number	Percent of time devoted to business	Percent of stock owned	Amount of compensation
Marissa Hunt	435-54-2342	100%	.05%	$235,000
Dakon Williams	243-98-3242	100%	.03%	$195,000
Deon Johnson	194-23-7435	100%	0%	$165,000
Jennifer Conley	623-53-3920	100%	0%	$150,000

Near the end of the year, FF switched its property and casualty insurance company. As a result, the plan year for its insurance contract was altered. On December 31, 2012 FF prepaid insurance premiums of $25,000 representing coverage through February 15 of 2013 as a condition of being accepted by the new company. FF did not expense any of the prepayment for financial accounting purposes

FF rents from vendors several pieces of equipment to use in its business. As of December 31, 2011 and December 31, 2012, respectively, FF had prepaid vendors for equipment rental of $30,000 for January of the current year and $35,000 for January of next year, respectively.

On December 26, 2012 FF prepaid a contractor $17,500 to repair several pieces of maintenance shop equipment in January of 2013. FF fully expects that the contractor will have completed the project by January 31 of next year.

All of the accrued wages and bonus amounts on the financial statements as of December 31, 2012 were paid on February 28, 2013.

As of December 31, 2011 and 2012, respectively, FF had vacation accruals on its books of $29,000 and $35,000. As of March 15, 2012 and 2013, respectively, FF had paid $5,000 and $8,000 of those accrued amounts.

On December 2, 2012, the millionth customer entered the park. To recognize the accomplishment and to promote the amusement park through print and radio media advertisements, FF held a give-away contest wherein the lucky customer deemed to be the millionth customer would be given $100,000. The check was presented to the lucky winner on January 15, 2013.

The land on which FF resides is owned by the county. FF has a very favorable lease with the county that allows FF the ability to sublease any portion of the ground to another tenant. The board of directors of FF made the decision in the fall of the 2012 to seek out a tenant for unimproved land that would not be utilized in any potential expansion plans. FF identified the potential renter and entered into a contract with the renter on December 1, 2012. The rent period is to begin on January 1, 2013; however, as part of the contract, the renter was required to pay a full six-month rental amount ($50,000) to FF by December 31, 2012. FF received a check of $50,000 on December 27, 2012 from the renter. This rental payment is not refundable to the renter under any circumstances.

FF maintains an inventory of several items that it uses in its amusement park. Inventory is valued at cost. FF has never has never changed it inventory method. FF uses specific identification for its inventory. FF has never written down any subnormal goods. The rules of Section 263A (Unicap) apply to FF. The Unicap calculated costs related to ending inventory at December 31, 2011 and 2012 respectively were $15,000 and $19,000.

On December 1, 2012, FF paid a dividend to all common stockholders of $400,000.

During the current year, FF made federal estimated income tax payments of $72,500 each on April 15, June 15, September 15 and December 15 of the current year ($290,000 in total). If FF has overpaid its current year estimated taxes, FF would like to apply the excess to its estimated tax payments for next year. FF is NOT a “large corporation.” FF’s 2011 tax liability was $200,000.

FF made California state estimated income tax payments of $15,000 each on April 15, June 15, September 15 and December 15 of 2012 ($60,000 in total).

FF does not have a minimum tax credit carryforward from 2011.

Financial Statements (kept on a GAAP basis):

FUN FAIR OF VENTURA, INC.

Balance Sheet

Assets:                                                                             12/31/11                                           12/31/12

Cash                                                                                 $     165,000                                      $    119,000

Accounts Receivable                                                           128,000                                             75,000

Less: Allowance for Bad Debts                                          (43,000)                                            (49,000)

Inventory                                                                                422,000                                            390,000

Tax-exempt Securities                                                        150,000                                             150,000

Publicly Traded Stocks                                                        200,000                                             200,000

Fixed Assets                                                                    24,000,000                                    28,000,000

Less: Acc. Depreciation                                                (13,542,000)                                    (12,892,000)

Prepaid Insurance                                                                            0                                                25,000

Prepaid Rent                                                                            30,000                                              35,000

Prepaid Installation Contract                                                         0                                               17,500

Other Assets                                                                           150,000                                            250,000

Total Assets:                                                                   $11,660,000                                     $16,320,500

Liabilities and Capital:

Accounts Payable                                                                   48,000                                               62,000

Accrued Wages                                                                     123,000                                            118,000

Accrued Bonuses                                                                    68,500                                               39,000

Accrued Vacation                                                                    29,000                                              35,000

Legal Settlement Accrual                                                                0                                             190,000

Prize Accrual                                                                                      0                                            100,000

Unearned Rental Income                                                                0                                               50,000

Note Payable-First Bank of CA (Credit Line)                1,540,000                                        1, 084,000

Note Payable-Equipment Leasing, Inc.                          7,112,000                                    11,728,000

Capital Stock                                                                           100,000                                            100,000

Additional paid-in Capital                                                 2,000,000                                         2,000,000

Retained Earnings-Unappropriated                                   639,500                                            814,500

Total Liabilities and Capital:                                       $11,660,000                                     $16,320,500

Income Statement for the period ending December 31, 2012

Item                                                                                                 Amount

Income:

Gross Sales                                                                                    $26,523,275

Less: Returns                                                                                      (113,500)

Net Sales                                                                                      26,409,775

Cost of Goods Sold                                                                         (2,052,500)

Dividend Income                                                                                    4,300

Interest Income                                                                                     2,650

Municipal Bond Interest Income                                                      2,300

Total Income:                                                                                24,366,525

Expenses:

Employee Salaries                                                                        13,905,600

Repairs and Maintenance                                                                 492,350

Bad Debts                                                                                               58,000

Rent                                                                                                     1,543,000

Payroll Taxes                                                                                    1,112,400

Licensing Fees                                                                                        10,750

Property Taxes                                                                                    277,000

Interest Expense                                                                               781,000

Depreciation                                                                                    1,350,000

Office Supplies                                                                                     33,950

Employee Training                                                                              53,750

Safety Expenses                                                                                    31,000

Political Contribution                                                                            2,500

CA Safety Commission Fine                                                                 5,000

Advertising                                                                                           290,500

Admission Supplies                                                                            143,250

Meals and Entertainment                                                                     8,500

Travel                                                                                                     13,550

Insurance                                                                                            215,000

Legal Settlement                                                                               190,000

Prize Contest Expense                                                                     100,000

Fuel                                                                                                     158,675

Utilities                                                                                              2,530,500

Telephone                                                                                          135,250

Total Expenses before taxes:                                                    $23,441,525

CA state income tax expense                                                             60,000

Federal tax expense                                                                         290,000

Net Income:                                                                                  $ 575,000