Project Facts: Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year: $650,000 60,000 25,000 Sales Corporate dividend (from 5% owned corporation) Municipal bond interest Long-term capital gain Short-term capital loss Cost of goods sold Depreciation Nondeductible fines Advertising Utilities Rent (8,000) 320,000 65,000 4.000 7,000 6,000 5,000 Furthermore, Sunshine's liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year. 3) Assume that Sunshine Company is a general partnership. Alvin contributed $60,000 in exchange for a 60% partnership interest when it was formed this year. Ann contributed $40,000 in exchange for a 40% partnership interest at that same time. Neither made any other contribution to the partnership this year. Alvin received a $2,400 per month guaranteed payment ($28,800 in total) while Ann received no guaranteed payment as specified in the partnership agreement). The company made a $55,000 partial distribution of profits at the end of the year. (9 points) a) Calculate partnership ordinary income (loss) and separately stated items to be reported on Form 1065. b) What amount and type of income must Alvin report on his individual Form 1040 tax return? c) What amount of Alvin's income will be subject to self-employment tax? d) What is Alvin's basis in his Sunshine Company partnership interest at the end of the year? c) Note that you do not need to complete Form 1065 but this form and related schedules will be a useful guide in completing this portion of the assignment. 4) Assume that Sunshine Company is an s-corporation. Alvin contributed $60,000 in exchange for 60% of the stock while his wife's best friend, Ann, contributed $40,000 in exchange for the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary (528,800 in total). Ann doesn't work for the company so she received no salary. The company made a $55,000 partial distribution of profits at the end of the year. (9 points) a) Calculate Sunshine's ordinary income and separately stated items to be reported on Form 1120S. b) What amount and type of income must Alvin report on his individual Form 1040 tax return? c) What amount of Alvin's income will be subject to self-employment tax? d) What is Alvin's basis in his Sunshine Company stock at the end of the year? e) Note that you do not need to complete Form 1120-S but this form and related schedules will be a useful guide in completing this portion of the assignment. Project Facts: Sunshine Company is a calendar year accrual-basis taxpayer and is in its first year of operations. Sunshine Company had the following income, expense, and loss items for the current year: $650,000 60,000 25,000 Sales Corporate dividend (from 5% owned corporation) Municipal bond interest Long-term capital gain Short-term capital loss Cost of goods sold Depreciation Nondeductible fines Advertising Utilities Rent (8,000) 320,000 65,000 4.000 7,000 6,000 5,000 Furthermore, Sunshine's liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year. 3) Assume that Sunshine Company is a general partnership. Alvin contributed $60,000 in exchange for a 60% partnership interest when it was formed this year. Ann contributed $40,000 in exchange for a 40% partnership interest at that same time. Neither made any other contribution to the partnership this year. Alvin received a $2,400 per month guaranteed payment ($28,800 in total) while Ann received no guaranteed payment as specified in the partnership agreement). The company made a $55,000 partial distribution of profits at the end of the year. (9 points) a) Calculate partnership ordinary income (loss) and separately stated items to be reported on Form 1065. b) What amount and type of income must Alvin report on his individual Form 1040 tax return? c) What amount of Alvin's income will be subject to self-employment tax? d) What is Alvin's basis in his Sunshine Company partnership interest at the end of the year? c) Note that you do not need to complete Form 1065 but this form and related schedules will be a useful guide in completing this portion of the assignment. 4) Assume that Sunshine Company is an s-corporation. Alvin contributed $60,000 in exchange for 60% of the stock while his wife's best friend, Ann, contributed $40,000 in exchange for the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary (528,800 in total). Ann doesn't work for the company so she received no salary. The company made a $55,000 partial distribution of profits at the end of the year. (9 points) a) Calculate Sunshine's ordinary income and separately stated items to be reported on Form 1120S. b) What amount and type of income must Alvin report on his individual Form 1040 tax return? c) What amount of Alvin's income will be subject to self-employment tax? d) What is Alvin's basis in his Sunshine Company stock at the end of the year? e) Note that you do not need to complete Form 1120-S but this form and related schedules will be a useful guide in completing this portion of the assignment
