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Alvin's Music Inc Tax problem




Question;?;You will complete 1 comprehensive problem. The comprehensive;problem is found in the textbook and is titled the ?Alvin's Music? problem.;Your work should be submitted as a PDF file using the tax software of your;choosing, provided it is attached as a PDF file. One such program is ProSeries;by Intuit. You can find it at Click ?Try it Free? to get started. You can;use the Professional or Basic product. Or, you may choose to prepare the return;by hand. In order to do this, you?ll need to copy the necessary forms and;schedules from the textbook. As you complete this assignment, pay special;attention to accuracy and the potential impact of errors. Any potential impact;of an error will be taken into account for future return calculations, and will;not necessarily affect the point deductions. Points are deducted based on the;number of mistakes.;Two important notes;1) You must submit the;tax return as a PDF file.;2) If you plan to use a tax package, do not wait until Module/Week 7 to learn;how to use the software. You will need time to learn how to use the software;PRIOR to beginning the tax return problem.;CORPORATE;TAX RETURN PROBLEM 1;Required;? Complete;Alvin's Music Inc.'s (AMI) 2012 Form 1120, Schedule D, and Schedule G (if;applicable) using the information provided below.;? Neither;Form 4562 for depreciation nor Form 4797 for the sale of the equipment is;required. Include the amount of tax depreciation and the tax gain on the;equipment sale given in the problem (or determined from information given in;the problem) on the appropriate lines on the first page of Form 1120.;Page C-14;?;Assume that AMI does not owe any alternative;minimum tax.;?;If any information is missing, use reasonable;assumptions to fill in the gaps.;? The;forms, schedules, and instructions can be found at the IRS Web site ( The instructions can be helpful;in completing the forms.;Facts;Alvin's;Music Inc. (AMI) was formed in 2006 by Alvin Jones and Theona Smith. Alvin and;Theona officially incorporated their store on June 12, 2007. AMI sells (retail);all kinds of music-related products including musical instruments, sheet music;CDs, and DVDs. Alvin owns 60 percent of the outstanding common stock of AMI and;Theona owns the remaining 40 percent.;?;AMI is located at 355 Music Way, East Palo;Alto, CA 94303.;?;AMI's Employer Identification Number is;29-5748859.;? AMI's;business activity is retail sales of music-related products. Its business;activity code is 451140.;?;Officers of the corporation are as follows;? Alvin is the chief;executive officer and president (Social Security number 123-45-6789).;?;Theona is the executive vice president;(Social Security number 978-65-4321).;? Gwen;Givens is the vice president over operations (Social Security number;789-12-3456).;?;Carlson Bannister is the secretary (Social;Security number 321-54-6789).;? All officers devote 100;percent of their time to the business and all officers are U.S. citizens.;?;Neither Gwen nor Carlson owns any stock in;AMI.;?;AMI uses the accrual method of accounting and;has a calendar year-end.; 8/4/2014;IEB Wireframe Page 2 of;4;? AMI made four equal;estimated tax payments of $70,000 each. Its tax liability last year was;$175,000. If it has overpaid its federal tax liability, AMI would like to;receive a refund.;?;AMI paid a dividend of;$80,000 to its shareholders on December 1. AMI had ample earnings and profits;(E&P) to absorb the distribution.;The;following is AMI's audited income statement for 2012;Page C-15;Notes;1. AMI has a capital;loss carryover to this year from last year in the amount of $5,000.; 8/4/2014;IEB Wireframe Page 3 of;4;2.;AMI's inventory-related;purchases during the year were $1,134,000. AMI values its inventory based on;cost using the FIFO inventory cost flow method. Assume the rules of ?263A do;not apply to AMI.;3. Of;the $15,000 interest income, $2,500 was from a City of Fremont bond that was;used to fund public activities (issued in 2012), $3,500 was from a Pleasanton;city bond used to fund private activities (issued in 2011), $3,000 was from a;U.S. Treasury bond, and the remaining $6,000 was from a money market account.;4. AMI;sold equipment for $10,000. It originally purchased the equipment for $12,000;and, through the date of the sale, had recorded a cumulative total of $4,000 of;book depreciation on the asset and a cumulative total of $6,000 of tax;depreciation. For tax purposes, the entire gain was recaptured as ordinary;income under ?1245.;5. AMI's;dividend income came from Simon's Sheet Music. AMI owned 15,000 shares of the;stock in Simon's Sheet Music (SSM) at the beginning of the year. This;represented 15 percent of the SSM outstanding stock.;6.;On July 22, 2012, AMI sold;2,500 shares of its Simon's Sheet Music Stock for $33,000. It had originally;purchased these shares on April 24, 2006, for $25,000. After the sale, AMI;owned;12.5percent of;Simon's Sheet Music.;7.;AMI's compensation is as follows;?;Alvin $210,000;?;Theona $190,000;?;Gwen $110,000;?;Carlson $90,000;?;Other $700,000;8.;AMI wrote off $10,000 in accounts receivable;as uncollectible during the year.;9. Regular;tax depreciation was $31,000. None of the depreciation should be claimed on;Form 1125A.;Page C-16;10.;Of the $62,000 of interest;expense, $56,000 was from the mortgage on AMI's building and the remaining;$6,000 of interest is from business-related loans.;11. The;pension expense is the same for both book and tax purposes.;12. Other;expenses include $3,000 for premiums paid on term life insurance policies for;which AMI is the beneficiary. The policies cover the lives of Alvin and Theona.;The following are AMI's;audited balance sheets as of January 1, 2012, and December 31, 2012.; 8/4/2014;IEB Wireframe Page 4 of;4; 8/4/2014


Paper#40659 | Written in 18-Jul-2015

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