Please do this tax return problem, thanks.

CORPORATE TAX RETURN PROBLEM

Facts

William Spicer (SS# 123-45-6789) owns 80 percent of the stock in Bills Market, an accrual basis gourmet food market operating as a corporation. It is located at 387 Spring Street, Raleigh,NC 29288. Williams wife, June (SS# 987-65-4321), owns the other 20 percent of the outstanding stock of the corporation but she is not active in the business. The Markets EIN is 79-7979797 and its business code is 445290. It was incorporated on July 15, 2006.

During the last tax year, the Market had the following results from its operations:

Gross sales ($1,300,000 from credit card sales) $2,700,000

Merchandise purchases 1,980,000

Expenses:Advertising $40,000

Charitable contributions 2,000

Cleaning/maintenance 12,000

Depreciation (MACRS pre-2015 purchases) 3,000

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Section 179 expense (2/1/13 display case) 5,000

Payroll taxes (excluding FICA on Williams salary) 18,000

FICA on Williams salary 10,247

Williams salary 200,000

Health insurance 15,000*

Insurance (excludes health) 18,000

Interest expense 1,000

Licenses/fees 4,000

Meals/entertainment 1,000

Office expenses 14,000

Rent 120,000

Salary/wages 210,000

Travel 8,000

Utilities 16,000

*Includes $3,000 for health insurance for William and his family.

The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August 15, 2015.The Market also sold a display case for $1,000 on December 12, 2015, that had cost $12,000 when purchased on June 6, 2011; it had an adjusted basis of $4,000 when sold. The gains or losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements.

Information specific to the corporate form: The corporation made estimated payments for its own taxes of $10,000 and withheld $45,000 from Williams salary for income taxes. For financial accounting, the corporation does not expense the new display case but deducts $1,000 of depreciation expense. It has a beginning balance of $200,000 in its retained earnings account and made a $25,000 dividend distribution to its shareholders on December 31, 2015.

2

The corporations beginning and ending accrual-basis balance sheets for 2015 are shown below:

Jan. 1, 2015 Dec. 31, 2015

Assets:

Cash $62,000 $ 49,753

Acc Rec 37,500 37,500

Inventory 340,000 340,000

Tax Refund 5,462

Plant, Prop&Equip $80,000 $68,000

Less: Acc Deprec. 62,000 59,000

NET 18,000 9,000

Total Assets $457,500 $441,715

Liabilities and Equities:

Accounts Payable $20,000 0

Deferred Tax Liability 0 $600

Note Payable 12,500 12,500

Common Stock 225,000 225,000

Retained Earnings 200,000 203,615

Total Liab.&Equities $457,500 $441,715