Project Facts:

Sunshine Company is a calendar year accrual-basis taxpayer in its second year of operations. Sunshine Company had the following income, expense, and loss items for the current year:

Sales	$990,000
Corporate dividend (from 5% owned corporation)	100,000
Municipal bond interest	50,000
Long-term capital gain	7,000
Short-term capital loss	(12,000)
=	400,000
Depreciation	116,000
Nondeductible fines	10,000
Advertising	14,000
Utilities	5,000
Rent	12,000

Furthermore, Sunshines liabilities (all recourse) increased from $10,000 on 1/1 to $610,000 on 12/31 of the current year (assume tax year 2019 for purposes of completing the required tax forms).

Additional Background Facts:

Sunshine is a dive shop that operates out of New York, NY and sells retail merchandise of interest to beachgoers including swimsuits, snorkeling and scuba diving equipment, surf boards, boogie boards, etc. Alvin Smart, a certified scuba diving instructor, owns the business. In addition, Alvin manages the dive shop and operates tours to local snorkeling and scuba diving areas of interest to generate additional revenue.

Sunshine is a calendar-year accrual basis taxpayer in its second year of operations. Business began on January 3 of last year. For Part 1, assume Alvin is the sole owner. For Parts 2-4, assume Alvin co-owns the business with Ann Webb, who does not work for the business.

Addresses and taxpayer identification numbers are as follows:

Sunshine		Alvin Smart		Ann Webb
898 Sady St.		1314 Hog St.		888 Corn St.
New York, NY 112233		New York, NY 112233		New York, NY 112233
FEIN: 12-3456789		SSN: 111-11-2222		SSN: 475-58-9999

1. Assume that Sunshine Company is a C-corporation. Alvin contributed $72,000 to purchase 60% of the stock while his wifes best friend, Ann, contributed $48,000 to purchase the remaining 40% of the stock when the corporation was formed last year. Alvin received a $5,000 per month salary ($60,000 in total). Ann doesnt work for the company so she received no salary. The company distributed some profits at the end of the year by paying out a $35,000 dividend. (12 points)
   1. Calculate Sunshine Corporations taxable income and income tax liability to be reported on Form 1120.
   2. What amount and type of taxable income must Alvin report on his individual Form 1040 tax return?
   3. What amount of Alvins income will be subject to self-employment tax?
   4. What is Alvins basis in his Sunshine stock at the end of this year?
   5. Prepare a complete and accurate 2019 Form 1120 (pages 1- 3 only), U.S. Corporation Income Tax Return, for Sunshine Company, Inc.
      1. To receive full credit, all required information should be completed, all required boxes should be checked, and any supporting details as requested on these forms should be included.
      2. Please note that if this were an actual tax return to be filed, pages 4-6 would be required, along with other supporting forms and schedules. You are asked to prepare only these 3 pages.