You (The Paid Tax Preparer) Your name is Robin Yount. You are a CPA and Senior Tax Manager in the CPA firm of Rosen and Craig, LLP. Your preparer tax identification number (PTIN) is P00384264.

Your Firm (Who You Work For) Rosen and Craig's address is 490 Jamestown Avenue - San Francisco, CA 94123 and its phone number is (650) 555-5555. The firm's EIN is: 20-3941936.The Client Your client is Royal Crown Toys Inc. Its address is: 1001 Tenth Avenue - Columbus, GA 31901. Its phone number is: (305) 555-5555. Royal Crown Toys is a seller of toys at the wholesale level.Its Employer Identification Number is 46-3938374. It was incorporated in Georgia on 02/15/1995. It is a non-publicly traded (private) corporation. The only corporate officer authorized to sign its tax returns is Patricia Sheridan.Her social security number is 342-10-3940 and she is a citizen of the United States. She is the President of the corporation. Patricia owns 72% of the shares of the corporation. She has owned 72% of the shares since the corporation was formed in 1995. She spent 2,465 hours working for the corporation in 2019.She was paid base wages of $1,483,000 as well as a $94,000 cash bonus in 2019 (the cash bonus was paid to her in 2019, but it related to the financial success of the corporation for 2018). She received no other bonuses or other incentive-based compensation in 2019. For years the corporation had an employment contract in place with Patricia since she was hired back in 1995. It was the same employment contract for many years. However, the contract was completely changed, with material changes, on December 31, 2018.

Patricia's home address is 19847 Pebble Beach Court - Atlanta, GA 30303.Her phone number is (470) 555-5555. The Chief Financial Officer of the corporation is Amy Jing. She spent 2,233 hours working for the corporation in 2019.She was paid base wages of $593,397 in 2019. Amy's social security number is 257-25-9741 and her home address is 123 Peachtree Way - Atlanta GA 30301. Amy does not own any shares in the corporation. She is also a citizen of the United States. She is also the interim Treasurer and Secretary of the corporation until they can find individuals to fill those officer positions. Neither Patricia nor Amy worked anywhere else other than at Royal Crown in 2019. There are no other officers for the corporation. In addition, the only shares in the corporation are in the form of common stock. There are no preferred shares.There is one other shareholder in the corporation: Jose Uribe. Jose owned 28% of the shares of the corporation throughout the year. He has owned the same percentage of the corporation's stock since it was incorporated in 1995. He is a citizen of the United States.Jose's social security number is 938-39-3927 and his home address is 1967 Chopper Way - Atlanta, GA 30301. His phone number is (404) 555-5555. Royal Crown uses the cash basis of accounting for both financial accounting and tax return purposes.It has a December 31 year-end for both financial accounting and tax purposes.Its 2019 financial accounting-based income statement and balance sheet starts on the following page.

2019 Income Statement

Revenues

Gross sales:$14,023,000

Less: Customer returns(141,600)

Dividends:$185,000

Interest (from Bank Accounts):$297

Interest on U.S. Treasury Bonds:$1,394

Interest on Bolt Corp. Bonds$937

State of Georgia Bond Interest:$193

City of Atlanta, GA Bond Interest$307

Cost of Goods Sold

Inventory as of 1/1/19 of $3,093,452

Inventory purchased during 2019: $9,423,679

Inventory as of 12/31/19 of $2,930,490

[Note: All inventory figures are valued based on original cost and using the specific identification method because their computer systems can track the cost of each individual item sold. IRC Sect. 263A (UNICAP) does not apply to the corporation; there were no changes in the method of valuing inventories; and there were no writedowns of subnormal goods in 2019.]

Expenses (Other than Cost of Goods Sold)

Warehouse rent: $160,248

Accounting Services: $24,125

Office Supplies: $34,392

Repairs and maintenance:$7,581

Depreciation: $1,600

Mortgage Interest Expense:$1,250

Lobbying $11,200(1)

Entertainment: $20,400

Meals:$7,926

(meals: by employees, while out of town on business trips)

Travel: $30,130

(travel: by employees, while out of town on business trips - includes airfare and hotels)

Charitable Contributions (cash)$57,433

Wages - Officers:$2,170,397

Wages (other employees):$739,292 (2) & (3)

Federal Payroll Taxes:$103,970

Fines and Penalties$9,700

Other Income/Expense Gain on sale of Government Debt Investments(4)$5,052

Loss on sale of corp. debt investments(5)($300)

Gain on the Sale of Business Assets(6)$33,000

Gain on the exchange of real property97)$200,000

////////\\\\\\\\ NET INCOME$jQuery224017051904982858812_1589043606010????

(The client was too busy to calculate this figure and they have asked you to calculate for them as a separate engagement from the preparation of the tax returns.)

(1)AmountspaidtoanoutsidelobbyistwhowenttovariousmembersofCongresstoaskforsupportoflegislationtorelaxtheFederalrulesontoysafety.Nolegislationwasevenwrittenin2019byanymemberofCongress.

(2)ThreeoftheemployeeswerecertifiedbyadesignatedlocalagencyasbeingamemberofatargetedWOTCgroup.Employee#1,AnnaHowe,worked2,300hoursfortheyearandwaspaid$23,000inwages.Sheisinwithinthe"regular"WOTCgroup.Employee#2,MeiZheng,worked243hoursfortheyearandwaspaid$3,920inwages.Sheisalsoinwithinthe"regular"WOTCgroup.Employee#3,ValKilmer,worked2,000hoursfortheyearandwaspaid$36,000inwages.HeiscertifiedtobeinthelongtermfamilyassistancerecipientsWOTCcategory.AnnaandMeiwerehiredandstartedworkonJanuary1,2019.ValwashiredandstartedworktheprioryearonJanuary1,2018.

(3)Oneofitsemployees,AnnaZheng(SocialSecuritynumber599463210),waspaid$3,500inspeciallydesignatedpaidfamilyleaveforfourweekssoshecouldtakecareofhersickmotherwhohadaveryserioushealthcondition.Anna'snormalsalaryis$1,000perweekandshehasworkedforthecompanysince2000.Sheearned$40,500ofwagesinthepriortaxyear(2018).RoyalCrown'sfamilyandmedicalleaveprogrammeetsalloftherequirementsofIRCSect.45SandtheguidancesetforthinIRSNotice201871.Noneofthe$3,500waspaidoutofAnna'ssick timeorvacationtime.Itwasspecificallypaidthroughthetermsofthecompany'swrittenfamilyandmedicalleaveplan.The$3,500paidundertheplanisalreadyincludedinthetotalamountofwagespaidtononofficersofthecorporationfortheyear.RoyalCrown'swrittenFamilyandMedicalleaveprogram/policycomplieswiththe"noninterference"languagerequirementunderpertinentlaws.

(4)SoldsomeofitsStateofGeorgiabondson8/1/19for$9,252toanunrelatedparty.Thebondsthatweresoldwerepurchasedon12/06/14for$4,200.RoyalCrownreceivedanIRSForm1099Bshowingthesaleofthesebonds,butthetaxbasisofthesebondswasnotprovidedtotheIRSonthe1099B

(5)soldsomeofitsBoltCorp.bondson10/1/19for$700(itsfairmarketvalue)toPatriciaSheridan.Thebondsthatweresoldwerepurchasedon12/26/12for$1,000.RoyalCrowndidnotreceiveanIRSForm1099Bshowingthesaleofthesebonds.

(6)The$33,000gainonthesaleofbusinessassetsin2019referstothesaleoftheforklifttoanunrelatedpartyon4/3/19for$36,000.RoyalCrownpaida$3,000commissionexpensetoabrokerrelatedtothesaleoftheforklift.Seeadditionaldetailsontheforkliftinfootnote#9below.7Seeadditionaldetailsinfootnote#8below.

12/31/2018 Year-End Balance Sheet

Cash:$4,284,189

Inventory:$3,093,452

Land(8 ) $400,000

Stock in Jadis Corp.$50,000

U.S. Treasury Stock $19,000

State of Georgia Bonds$65,800

City of Atlanta, GA Bonds$10,000

Bolt Corp. Bonds $12,500

forklift(cost)(9) $123000

Less: Accumulated Depreciation on Personal Property($123000)

Fixed Assets (personal property) $0

Liabilities

Mortgage Payable $25000

Shareholders' Equity

Common Stock $1,000,000

Retained Earnings-Unappropriated(10) $6915,141

(8)WhileRoyalCrownrentsthewarehouseinwhichitoperates,itownedavacantpieceofproperty3milesawayformanyyears.Thepropertywasusedtostoresomeofitsexcesspackagingincasetheydidnothaveroomintheirwarehouse.Thepropertywasoriginallypurchasedfor$400,000on9/13/2012.Theaddressforthispropertywas16BracketWay-Atlanta,GA30302.OnMarch25,2019thispropertywasexchangedwithanother,unrelatedtaxpayer,foranothervacantlotthatwillalsobeusedasaplacetostoreexcesspackaging.Thefairmarketvalueofthe16BracketWaypropertyatthetimeoftheexchangewas$625,000.

Thereplacementpropertyislocatedat5888HydroxWayAtlanta,GA30309.ThefairmarketvalueoftheHydroxWaypropertyatthetimeoftheexchangewas$575,000.TherewerenoexpensesrelatedtotheexchangeandtheotherpartyassumedthemortgageontheBracketWayproperty(a$25,000liabilityatthetimeoftheexchange).

(9)Originallypurchasedfor$123,000andplacedinserviceon03/15/2008.Wasfullydepreciatedforfinancialaccountingandtaxpurposespriorto2019.Soldfor$36,000on4/3/19.Thiswastheonlyfixedassetforthecorporationasof12/31/18otherthantheland.

(10) Allretainedearningsareunappropriated.

12/31/2019 Year-End Balance Sheet

Assets Cash: $5,109,946

Inventory: $2,930,490

Land: $575,000

Stock in Jadis Corp.$50,000

U.S. Treasury Stock$19,000

State of Georgia Bonds$65,800

Bolt Corp. Bonds $12,500

City of Atlanta, GA Bonds$10,000

Pre-Paid Federal Inc. Tax(11) $400,000

New Copier(Cost) (12) $30,000

Less:Accumulated Depreciation($1,500)

New Desk for Amy (Cost)(13) $5,000

Less: Accumulated Depreciation($100)

Fixed Assets (Personal Property) - Net Book Value$33,400

Liabilities

None $0

Shareholders' Equity

Common Stock$ 1,000,000

Retained Earnings - Unappropriated??????

(The client was too busy to calculate this figure and they have asked you to finish the Balance sheet)

(11)2019Federalestimatedtaxeswerepaidin2019.Theywerepaidinfourinstallmentsasfollows:$100,000on4/11/19;$100,000on6/14/19;$100,000on9/13/19and$100,000on12/13/19.

(12)Purchasedandplacedinserviceon5/04/19.RoyalCrownelectstotakethemaximumcostrecoveryonthisassetin2019underIRCSect179,andifapplicable,theydonotelectoutoffirstyearbonusdepreciation.

(13)Purchasedandplacedinserviceon7/4/19.RoyalCrowndoesnotelecttotakeanycostrecoveryonthisassetin2019underIRCSect179.However,ifapplicable,theydonotelectoutoffirstyearbonusdepreciation.

Detailed Task

1) After completing the few items that Royal Crownwas not able to provide to you in its prepared draft financial statements, using only the blank forms available at: www.IRS.gov, prepare Royal Crown's Federal income tax return (Form 1120) for the 2019 Tax Year - including the following schedules and forms (you must attach these forms in the required order as detailed by the IRS): Schedule D Form 1125-A Schedule G Form 1125-E Form 3800 Form 4562 Form 4797 Form 5884 Form 8824 Form 8949 Form 8994

2) For any part of the tax return where a statement is required, you must attach a statement to the end of the tax return as the last attachment to the 1120 return (before the information returns) - with a reference to what form and line of the return it applies to, as well as the name of the taxpayer and the EIN of the taxpayer on the top of each statement page.

3) You do not need to do 1099-series forms, but your team will need to research when 1099-series forms apply. For this project you will only need to research Forms 1099-MISC and 1099-DIV. If you believe that either of these forms would be been required to be filed by Royal Crown for 2019, then check the applicable YES boxes

(both of them) on Form 1120. Otherwise, check no for the first 1099-related box on Form 1120.

4) All of the repairs and maintenance services were performed to Royal Crown by another corporation (Repairs R Us, Inc. - 578 Culture Drive- Atlanta, GA 30301; EIN - 771581297; Phone (470) 555-5556.

5) The entertainment expenses were for tickets for the Atlanta Hawks NBA basketball team. Royal Crown took out its biggest clients and vendors to discuss business matters at all of the games.

6) In addition to signing the tax return as the paid preparer, for purposes of this project also actually sign the return as the taxpayer (keeping in mind you would not in real practice).

7) You do not need to do payroll tax returns or forms (such as the W-2 or W-3) for the client (Amy handles the payroll tax returns herself for the corporation).

Other Important Items: 1) The landlord for the store that Royal Crownrents is Dane Iorg. Dane's address is 578 Jay Way - Menlo Park, CA 94025. His tax ID is 20-1484863 and his phone number is (650) 555-8888.

2) All of the amounts paid in 2019 for accounting services was paid to Rosen and Craig, LLP.

3) Royal CrownCorporation is not a subsidiary in an affiliated group or a parent-subsidiary group.

4) Royal CrownCorp. purchased 5,000 shares in Jadis Corporation, a U.S.based corporation that specializes in the management of junkyards on October 5, 2012 for $50,000.Jadis Corp.had 19,500 shares outstanding throughout 2019. On October 31, 2019, Royal Crownreceived a $185,000 dividend check from Jadis Corporation. Jadis Corporation's Employer Identification Number is 77-2573648.

5) The two shareholders in Royal Crown Inc. had the same ownership in the corporation throughout the year.

6) Royal Crown has an $8,000 NOL carryover into the 2019 tax year.

7) For Schedule K of Form 1120, you are given that the answers to question nos. 14, 17, 18, and 19 are "no" and the checkbox to no. 8 is to be unchecked.

8) Your client has asked you to file the return with the fewest number of required schedules filled-out on the 1120 form as legally possible.

9) $50,000 of cash distributions from Royal CrownCorp. were made in 2019. Each of the two shareholders received cash distributions based on their percentage ownership in the corporation. All cash distributions were paid on December 30, 2019.

10)On 2/15/1995, the corporation issued common stock to its two initial (and still current) shareholders - with the two shareholders paying the following amounts for the stock: $720,000 for Patricia and $280,000 for Jose.

11) If there is an amount due for the year on the 1120, the client (as a corporation) will need to pay the IRS electronically (i.e., not via check).

However, for purposes of this tax return project, if tax is due for the year you do not need payment documentation - simply show the amount due on the appropriate line(s) of the 1120 tax return accordingly. Also, if tax is due for the year, you do not need to calculate any penalties or interest - just the base tax due.

On the other hand, if there is a refund due to the client on the 1120 tax return for the year, the client wants to receive the refund in the form of a check (i.e. they do not want any portion of the refund credited to next year's Federal income taxes).

12) All amounts contributed to charitable organizations for the year were made in cash, all of the charities were IRS-qualified charities and the charities all provided the client with the required documentation in a timely manner.

13) All wages paid to shareholders are ordinary, necessary and reasonable in amount , with none being disguised dividends.

14) All expenses - including wages paid to shareholders - are ordinary, necessary and reasonable, with none being disguised dividends.

15) None of the entertainment expenses are lavish or extravagant.

16) None of the wages are includable in cost of goods sold.

17) All of the corporate bonds that were owned either at the beginning of the year or at the end of the year mature more than five years after the end of the 2019 tax year and the client did not expect to sell them or convert any of them into cash until they mature. The small sale of corporate bonds in 2019 was unexpected and it was not easy to sell these particular bonds as they were not readily traded on an exchange (they were not liquid assets that were readily convertible into cash).

18) For Schedule K of Form 1120, you are given that the answers to question nos. 14, 17, 18, 19, 20, 21, 22, 23, and 25 are "No" and the checkbox to no. 8 is to be unchecked. Mark "Yes" for question no. 24 of Schedule K.

19) For Schedule J, you can skip lines 3; 5a; 5b; 5d; 5e; 9a-9f; 10; 12; 13; 15; 17; 18; 20a-20d; 21and 22. Any other parts that are applicable in Schedule J must be completed. For a non-skip line in Schedule J, you will need to determine if a figure goes on that line. There is a possibility that at least one

non-skip line in Schedule J is still not applicable. If not applicable, simply put "0" for that line.

20) For Form 3800, you skip: all of Part I (but put down "0" for line 6); Lines 10a-c, 18-26 and 31-35 of Part II

21) Your client allows you to discuss its tax return with the IRS.