Scenario 4 - Spotless Cleaners

Complete Form 1120-S for Spotless Cleaners. Do not elect the extra depreciation allowance and do not take any Section 179 deduction.

Spotless Cleaners, EIN 54-1556216, 9013 Castle Wood Rd., Your City, Your Town - Your Zip, a cleaning service which operates on an accrual basis, was incorporated January 10 of the current tax year and elected S corporation status. The corporation utilizes a calendar year.

Spotless has two shareholders: Michael Taylor, SSN 555-00-9654, 300 W. Graves Ave., Your City, Your Town - Your Zip, who owns 75% and purchased 150 shares for $75 par value; and Mary Jane Taylor, SSN 222-00-8965, same address, who is a 25% owner and purchased 50 shares for $75 par value. They received a cash distribution (divided according to percentage of ownership) of $15,000 on May 7 of the current tax year.

Spotless Cleaners borrowed $20,000 to cover expenses. $2,000 was payable on April 25 of the current tax year and $6,000 per year for the next three years. The accounts payable balance as of December 31 of the current tax year was $2,500. The accounts receivable balance as of December 31 of the current tax year was $1,000.

Spotless has two identical trucks (each weighs less than 6000 lbs. loaded) that are driven only for business. Michael contributed one truck and Mary Jane contributed the other one. A different person drives each truck.

Note: Assume the meals expense is not eligible for the increased 100% deduction.

Copyright 2023, The Income Tax School, Inc. - All Rights Reserved SQLA - 8.7

Vehicle Information
Vehicle	Date placed into service	Cost	Miles driven during the year
Truck 1	03/01/current year	$12,000	3,634 miles
Truck 2	03/01/current year	$12,000	3,634 miles

Additional financial information for Spotless Cleaners is provided on the following page.

Spotless Cleaners Financial Information
ItemAmount
Gross receipts $ 55,440
Returns and allowances$ 146
Interest income on receivables $ 1,000
Wages and salaries to employees$ 8,200
Repairs and maintenance $ 785
	Taxes		$ 1,000
Licenses $ 590
Rent on the building$ 2,400
Advertising expense $ 500
Charitable contributions to United Way$ 2,000
Voice mail $ 100
	Bonding insurance		$ 125
Workers' compensation insurance $ 1,000
Cell phone$ 111
Office expenses $ 1,250
Uniforms$ 228
Bank service charges $ 100
	Gasoline and oil		$ 2,500
Auto repairs $ 425
Airfare and hotels$ 500
Automobile insurance $ 1,000
Liability insurance$ 818
Retail Merchants membership $ 150
Cleaning and supplies $ 5,895
Parking and tolls $ 175
Accounting services$ 375
Subcontractor labor $ 1,750
Meals $ 220
Christmas gifts (20 persons @ $45/person) $ 900