Fundamentals of Taxation II

Spring $2024$

Jarnagin

$1120$ Tax Return

Instructions

Part $1$:

$1.$ Income Statement and Balance Sheet

$$ Financial accounting based

$$ Must be in Excel

$2.$ Income Statement and Balance Sheet are due at $11$:$59$pm on March $8,2024$

Part $2$:

$3.$ Tax forms can be found at irs.gov

$4.$ Prepare $2023$ Form $1120(6$ pages$)$

$5.$ Include all supporting calculations

$$ May be hand$-$written

$6.$ Tax return and schedules MUST be typed

$$ Anything hand$-$written will not be accepted

$7.$ Tax return is due at $11$:$59$pm on April $5,2024$

$$ Any return submitted after $11$:$59$pm on April $5,2024$ will not be accepted

$$ If you turn your return in one week early $(11$:$59$pm on March $29,2024),$ you will receive $5$ points extra credit

$$

Facts

Razorback Sports Inc. was formed in $2019$ by Austin Williams and Tyler Jacobs. Austin and Tyler officially incorporated their store on March $12,2019.$ Razorback Sports sells all kinds of sports$-$related products including equipment, uniforms and athletic shoes. Austin owns $60\%$ of the outstanding common stock of Razorback Sports and Tyler owns the remaining $40\%.$

Razorback Sports is located at $123$ College Ave, Fayetteville, AR $72701.$ Its employer identification number is $29-5748859$ and its business activity code is $451110.$ Razorback Sports uses the accrual method of accounting and has a calendar year$-$end.

The officers of Razorback Sports and their Social Security numbers are:

Name Title SS number

Austin Williams CEO$/$President $123-45-6789$

Tyler Jacobs Executive VP $789-12-3456$

Kellie Francis Operations VP $321-54-9876$

Jason Roberts Secretary $987-65-4321$

A trial balance for the corporation is attached. Additional information is presented below.

Amount

$1.$ Razorback Sports has a capital loss carry over from last year of $3,075$

$2.$ Interest income:

a$.$ From a City of Fayetteville bond that was used to fund new police station $4,213$

b$.$ From a U$.$S$.$ Treasury bond $6,642$

c$.$ From a money market account $7,595$

$3.$ Razorback Sports sold equipment.

a$.$ Selling price $10,947$

b$.$ Original purchase price $15,129$

c$.$ Total book depreciation on the equipment $9,041$

d$.$ Total tax depreciation on the equipment $8,241$

$4.$ Razorback Sports' dividend income came from Cardinal Inc. Razorback Sports owned $25,000$ shares of the stock in Cardinal at the beginning of the year. This represented $15\%$ of the Cardinal outstanding stock.

$5.$ On July $22,2023$ Razorback Sports sold $2,500$ shares of its Cardinal Inc. stock.

a$.$ Selling price $44,280$

b$.$ Razorback originally purchased these shares on April $24,201929,520$

c$.$ After the sale, Razorback Sports owned $12\mathrm{.}5\%$ of Cardinal Inc.

$6.$ Interest expense:

a$.$ From the mortgage on Razorback Sports' building $74,784$

From loan used to purchase City of Fayetteville bonds $1,476$

The business expense limit does not apply to Razorback Sports

$7.$ Wages to non$-$officers are $522,750$

$8.$ Pension expense is the same for both book and tax purposes.

$9.$ Miscellaneous expenses include premiums paid on term life insurance policies on the lives of Austin and Tyler $($Razorback Sports is the beneficiary of the life insurance policies$).2,460$

$10.$ Miscellaneous expenses include parking fines issued by the City of Fayetteville $2,239$

$11.$ The corporation uses MACRS depreciation for tax purposes. The corporation purchased all of its equipment on July $1,2019.$ Razorback Sports took the maximum amount of $179$ depreciation $($no bonus depreciation$).$ The equipment is all $7$ year property.

a$.$ Cost of the equipment $1,722,000$

$12.$ Accounts receivable written off by Razorback Sports during the year were $18,450$

$13.$ On December $1,2023$ Razorback Sports paid a dividend to its shareholders of $99,630$

$14.$ Razorback Sports made four equal estimated tax payments of $49,200$

a$.$ If it has overpaid its federal tax liability, Razorback would like to receive a refund.

$15.$ The corporation paid the following compensation to its officers:

Austin Williams $424,350$

Tyler Jacobs $350,550$

Kellie Francis $178,350$

Jason Roberts $159,900$

$16.$ All officers devote $100\%$ of their time to the business and all officers are U$.$S$.$ citizens.

$17.$ Neither Kellie nor Jason owns any stock in Razorback Sports.

$$

Accounts payable $100$

Accounts receivable $739,353$

Accumulated depreciation $461,250$

Advertising expense $66,420$

Allowance for doubtful accounts $65,129$

Bad debt expense $43,050$

Capital gains $14,760$

Capital stock $($common$)1,107,000$

Cash $415,863$

Charitable contributions $30,750$

Compensation expense $1,635,900$

Cost of goods sold $993,840$

Depreciation expense $24,600$

Dividends $($paid$)99,630$

Dividends $($received$)19,680$

Entertainment expense $4,305$

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