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: Sales $650,000 Corporate dividend (from 5% owned corporation) 60,000 Municipal bond interest 25,000 Long-term capital gain 0 Short-term capital loss (8,000) Cost of goods sold 320,000 Depreciation 65,000 Nondeductible fines 4,000 Advertising 7,000 Utilities 6,000 Rent 5,000 Furthermore, Sunshines liabilities (all recourse) increased from $0 on 1/1 to $300,000 on 12/31 of the current year.

1) Assume that Sunshine Company is owned by Alvin as a sole proprietorship. Alvin received $2,400 per month ($28,800 in total) from Sunshine Company as an owners draw. Additionally, Alvin took $55,000 out of Sunshine Company near the end of the year as a partial distribution of profits. (11 points) a) Calculate the net business income of Sunshine Company/Alvin that would be reported on Schedule C of Alvins Form 1040. b) How much of the $2,400 per month ($28,800 total) and the $55,000 distribution would Alvin include as taxable income on his Form 1040? c) What amount of Alvins income will be subject to self-employment tax? d) Note that you do not need to complete Schedule C or other forms, but these form will be a useful guide in completing this portion of the assignment.

2) Assume that Sunshine Company is a c corporation. Alvin contributed $60,000 to purchase 60% of the stock while his wifes best friend, Ann, contributed $40,000 to purchase the remaining 40% of the stock when the corporation was formed this year. Alvin received a $2,400 per month salary ($28,800 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 $55,000 dividend. (11 points) a) Calculate Sunshine Corporations taxable income and income tax liability to be reported on Form 1120. b) What amount and type of income must Alvin report on his individual Form 1040 tax return? c) What amount of Alvins income will be subject to self-employment tax? d) What is Alvins basis in his Sunshine stock at the end of this year? e) Note that you do not need to complete Form 1120 but this form and related schedules will be a useful guide in completing this portion of the assignment.

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 Alvins income will be subject to self-employment tax? d) What is Alvins basis in his Sunshine Company partnership interest at the end of the year? e) 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 wifes 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 ($28,800 in total). Ann doesnt 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 Sunshines 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 Alvins income will be subject to self-employment tax? d) What is Alvins 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.