Interview with client. Client answers in red: I have some questions related to the Cash, Inc....

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Interview with client. Client answers in red: I have some questions related to the Cash, Inc. financials you provided: Are you aware of any income or expenses for Cash, Inc. that were not included on the profit and loss statement you provided? Cash, Inc. received a payment of $150,000 in October. This was for a contract to provide services. Half of the services were provided in 2023 and the other half will be provided in 2024. The income was not included because the contract wasn't complete. Do we have to report this income? We would like to make any elections that will minimize income this year. I am not aware of any other income or expenses that are not reported. What does the income from the investment in ABC Corp include? Cash, Inc. owns 75% of ABC Corp. The amount reported as income is 75% of their book income for the year. ABC paid Cash a dividend of $28,000 this year. Tell me about "Sale of land"? Cash, Inc. sold a parcel of land (Parcel A) previously used to store some equipment. The land was purchased 10 years ago for $30,000 and sold this year for $38,000. What is included in "Rent" expense? Most of the cost is the monthly rental expense for our office building. Cash also paid $18,000 on August 1st for 18 months of rent (starting that day) on a storage facility. This entire payment was included in "Rent" expense this year. Do you have a MACRS and ADS depreciation schedule? No, our previous accountant always prepared one but we never received a copy. I've attached a book depreciation schedule which will give you the cost of each asset we owned during 2023 and the date it was placed in service. Tell me about the expense for "Organization Expenses". Cash incurred costs to establish a new wholly owned subsidiary. These costs were expensed in 2023 and the new subsidiary began operations on June 1, 2023. Do you know the balance of earnings and profits at the beginning of the year? Yes, we had a balance of $23,000. Additional notes: Cash, Inc. manufactures clothing. June is in the 37% tax bracket and is subject to the net investment income tax. Her friend George (potential new business partner) is in the 22% tax bracket and is not subject to the net investment income tax. June has owned her stock in Cash, Inc. for 15 years. Any dividends from Cash, Inc. or the newly proposed joint venture are qualified dividends. The newly proposed joint venture is not a specified service business and will pay enough wages that there will be no limitation on any qualified business income deduction nor would either owner have a taxable income limitation on this deduction. Cash, Inc. Depreciation Schedule - Book Basis For the year ended December 31, 2023 Accumulated Date placed in depreciation 2023 Accumulated depreciation 1/1/23 depreciation - 12/31/2023 - Asset # Asset service Cost basis Book Book Book 115 Land Parcel A (sold) 6/23/2013 $ 30,000 N/A N/A N/A 128 Land - Parcel B 3/12/2020 $ 180,000 N/A N/A N/A 143 Office furniture 3/12/2020 $ 87,000 $ 39,875 $ 14,500 $ 54,375 144 Heavy general purpose truck 6/14/2021 $ 74,000 $ 13,875 $ 9,250 $ 23,125 150 Computer equipment 8/5/2022 $ 37,000 $ 5,139 $ 12,333 $ 17,472 158 Manufacturing equipment 11/18/2022 $ 350,000 $ 5,833 $ 35,000 $ 40,833 $ 71,083 Cash, Inc. Statement of Profit and Loss (Accrual Basis) For the year ended December 31, 2023 6,634,578 Sales $ Cost of goods sold (2,825,985) Gross profit $ 3,808,593 Investment in ABC Corp 75,000 Sale of land 8,000 Capital gains (losses) (12,362) Other income $ 70,638 Salaries (3,167,892) Rent (312,745) Utilities (38,920) Supplies (62,093) Depreciation (71,083) Charitable contributions (20,000) Repairs and maintenance (23,943) Real estate taxes (37,989) Organization costs (58,000) Federal income taxes (33,409) Total Expenses $ (3,826,074) Net $ 53,157 Interview with client. Client answers in red: I have some questions related to the Cash, Inc. financials you provided: Are you aware of any income or expenses for Cash, Inc. that were not included on the profit and loss statement you provided? Cash, Inc. received a payment of $150,000 in October. This was for a contract to provide services. Half of the services were provided in 2023 and the other half will be provided in 2024. The income was not included because the contract wasn't complete. Do we have to report this income? We would like to make any elections that will minimize income this year. I am not aware of any other income or expenses that are not reported. What does the income from the investment in ABC Corp include? Cash, Inc. owns 75% of ABC Corp. The amount reported as income is 75% of their book income for the year. ABC paid Cash a dividend of $28,000 this year. Tell me about "Sale of land"? Cash, Inc. sold a parcel of land (Parcel A) previously used to store some equipment. The land was purchased 10 years ago for $30,000 and sold this year for $38,000. What is included in "Rent" expense? Most of the cost is the monthly rental expense for our office building. Cash also paid $18,000 on August 1st for 18 months of rent (starting that day) on a storage facility. This entire payment was included in "Rent" expense this year. Do you have a MACRS and ADS depreciation schedule? No, our previous accountant always prepared one but we never received a copy. I've attached a book depreciation schedule which will give you the cost of each asset we owned during 2023 and the date it was placed in service. Tell me about the expense for "Organization Expenses". Cash incurred costs to establish a new wholly owned subsidiary. These costs were expensed in 2023 and the new subsidiary began operations on June 1, 2023. Do you know the balance of earnings and profits at the beginning of the year? Yes, we had a balance of $23,000. Additional notes: Cash, Inc. manufactures clothing. June is in the 37% tax bracket and is subject to the net investment income tax. Her friend George (potential new business partner) is in the 22% tax bracket and is not subject to the net investment income tax. June has owned her stock in Cash, Inc. for 15 years. Any dividends from Cash, Inc. or the newly proposed joint venture are qualified dividends. The newly proposed joint venture is not a specified service business and will pay enough wages that there will be no limitation on any qualified business income deduction nor would either owner have a taxable income limitation on this deduction. Cash, Inc. Depreciation Schedule - Book Basis For the year ended December 31, 2023 Accumulated Date placed in depreciation 2023 Accumulated depreciation 1/1/23 depreciation - 12/31/2023 - Asset # Asset service Cost basis Book Book Book 115 Land Parcel A (sold) 6/23/2013 $ 30,000 N/A N/A N/A 128 Land - Parcel B 3/12/2020 $ 180,000 N/A N/A N/A 143 Office furniture 3/12/2020 $ 87,000 $ 39,875 $ 14,500 $ 54,375 144 Heavy general purpose truck 6/14/2021 $ 74,000 $ 13,875 $ 9,250 $ 23,125 150 Computer equipment 8/5/2022 $ 37,000 $ 5,139 $ 12,333 $ 17,472 158 Manufacturing equipment 11/18/2022 $ 350,000 $ 5,833 $ 35,000 $ 40,833 $ 71,083 Cash, Inc. Statement of Profit and Loss (Accrual Basis) For the year ended December 31, 2023 6,634,578 Sales $ Cost of goods sold (2,825,985) Gross profit $ 3,808,593 Investment in ABC Corp 75,000 Sale of land 8,000 Capital gains (losses) (12,362) Other income $ 70,638 Salaries (3,167,892) Rent (312,745) Utilities (38,920) Supplies (62,093) Depreciation (71,083) Charitable contributions (20,000) Repairs and maintenance (23,943) Real estate taxes (37,989) Organization costs (58,000) Federal income taxes (33,409) Total Expenses $ (3,826,074) Net $ 53,157