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tax problems




Question;For;this assignment, you will complete two tax returns (Corporation Return and;Partnership Return), for 175 points each. You may use the tax software found;at;Please note there is a;limit of 5 returns per session.;PART I ? Tax Return #1, Corporate ReturnBackground;Jane Collier, James;Taye, and Steve Allwine each own one-third of the common stock of Tasty Treats;and Beverages. The corporation was incorporated on April 3, 2004. It has only;one class of stock outstanding and operates as a C corporation for tax;purposes. Tasty Treats and Beverages caters kid-friendly social events.;?;Located at 1215 Blue Horizon, Dallas, TX 12234.;?;Employer Identification Number is 12-34567890.;?;Business activity is catering food. Its business activity code;is 722300.;?;The shareholders also work as officers for the corporation as;follows;o Jane is the chief;executive officer and president (Social Security number 242-62-5786).;o James is the executive;vice president and chief operating officer (Social Security number;563-58-8923).;o Steve is the vice;president of finance (Social Security number 575-58-1572).;All officers devote 100% of their time to the business;All officers are U.S. citizens.;Use the accrual method of accounting and have a calendar;year-end.;Four equal estimated tax payments of $28,000 each quarter. Its;tax liability last year was $85,000.;If it has overpaid its federal tax liability, the corporation;would like to receive a refund.;Dividend paid of $20,000 to its shareholders on October 1. The;Corporation had ample earnings and profits (E&P) to absorb the;distribution.;Financial Statements;Tasty Treats and Beverages, Inc.;Income Statement;For year ended December 31, 2013;Revenue from sales;1,500,000;Sales returns and allowances;(25,000);Cost of goods sold;(325,000);Gross profit from operations;1,150,000;Other Income;Capital loss;(7,500);Dividend income;15,000;Interest income;12,000;Gross income;1,169,500;Expenses;Compensation;(750,000);Depreciation;(12,000);Bad debt expense;(7,800);Meals and entertainment;(3,000);Maintenance;(2,500);Property taxes;(10,000);State income taxes;(30,000);Other taxes;(11,000);Rent;(28,000);Interest;(7,300);Advertising;(6,200);Professional services;(5,000);Employee benefits;(8,000);Supplies;(2,500);Other expenses;(1,750);Total expenses;(885,050);Income before taxes;284,450;Federal income tax expense;96,713;Net income after;taxes;187,737;?;?;Tasty;Treats and Beverages, Inc.;Balance;Sheet;December;31, 2013;ASSETS;January;2013;December;2013;Cash;175,000;190,000;Accounts;Receivable;63,000;54,000;Allowance;for doubtful accounts;(8,000);(7,000);Inventory;225,000;275,000;US;government bonds;30,000;25,000;State;and local bonds;50,000;50,000;Investments;in stock;325,000;335,000;Fixed;assets;475,000;485,000;Accumulated;depreciation;(198,000);(215,000);Other;assets;11,000;12,000;Total;assets;1,148,000;1,204,000;Liabilities;and Stockholder's Equity;Accounts;payable;225,000;200,000;Other;current liabilities;135,000;55,000;Other;liabilities;75,000;68,263;Capital;stock;250,000;250,000;Retained;earnings;463,000;630,737;Total;liabilities and stockholder's equity;1,148,000;1,204,000;?;Additional Information;o Inventory-related;purchases during 2013 were $175,000. It values its inventory based on cost;using the FIFO inventory cost flow method. Assume the rules of ?263A do not;apply.;o Of the $12,000;interest income, $1,500 was from a City of Dees bond that was used to fund;public activities (issued in 2011), $1,750 was from an Border city bond used to;fund private activities (issued in 2004), $2,500 was from a U.S. Treasury bond;and the remaining $6,250 was from a money market account.;o Dividend income came;from ABC Inc. Owned 10,000 shares of the stock in ABC Inc. at the beginning of;the year. This represented 10 percent of outstanding stock.;o On September 1, 2013;the corporation sold 1,000 shares of its ABC stock for $15,000. It had;originally purchased these shares on June 13, 2006, for $7,500. After the sale;the Corporation owned 9 percent of ABC.;o compensation is as;follows;? Jane $175,000;? James $150,000;? Steve $150,000;? Other $275,000;o The Corporation wrote;off $10,000 in accounts receivable as uncollectible during the year.;o Regular tax;depreciation was $28,000. None of the depreciation should be claimed on Form 1125A.;o The $7,300 interest;expense was from a business loan.;o Other expenses include;$3,000 for premiums paid on term life insurance policies for which Tasty Treats;and Beverages, Inc. is the beneficiary. The policies cover the lives of Jane;James, and Steve.PART II ? Tax Return #2, Partnership Return (Form 1065, only;Page 1 and Schedule K required);Background;The Rowdy Fun is a;limited partnership and was formed on June 1, 2005, by Thomas Kyle, its general;partner, and two other limited partners when they each contributed an equal;amount of cash to start the new enterprise. Rowdy Fun is an outdoor equipment;retailer focused on selling outdoor activities gear. Thomas has a 33.33%;profits and capital interest and the limited partners hold the remaining 66.66%;of the profits and capital interests. Their profits and capital interests have;remained unchanged since the partnership was formed. Thomas is actively;involved in managing the business while the limited partners are simply;investors.;?;Rowdy Fun is located at 8955 Golden Drive, Sunnydale, AZ 34592.;?;The employer identification number for Rowdy Fun is 47-8593563.;?;Rowdy Fun uses the accrual method of accounting and has a;calendar year end.;?;Thomas' address is 853 Crystal Drive, Sunnydale, AZ 34592.;Additional Information;?;Rowdy Fun has total assets of $1,900,000 and total liabilities;of $550,000 at the beginning of the year and total assets of $2,300,00 and;total liabilities of $725,000 at the end of the year.;?;Partnership liabilities consist of accounts payable, and Thomas;as general partner, is legally responsible for paying these liabilities if the;partnership does not.;?;Five years ago, Rowdy Fun purchased an original outdoor statue;with the intent for display in the store. In 2013, the statue was sold. The;$15,000 recognized gain from the sale is reflected in the income statement.;?;For tax purposes, Rowdy Fun has consistently elected under;Section 179 to expense any furniture or fixtures purchased every year since it;was formed. There is no tax basis in any of its depreciable assets. This year;Rowdy Fun expensed $23,000 of signs and display cases for tax purposes.;?;On November 20th, Rowdy Fun distributed $90,000 ($30,000 per;partner) to the partners.;?;Miscellaneous expenses include a $1200 fine for violating a;local ordinance.;?;Rowdy Fun maintains its books using generally accepted;accounting principles.;Financial Statements;Rowdy Fun;Income Statement;For year ended December 31, 2013;Sales;975,000;Sales returns and allowances;(25,000);Cost of goods sold;(300,000);Gross profit from operations;650,000;Other Income;Interest from Money Market;3,500;Gain for sale of statue;15,000;Gross income;668,500;Expenses;Employee wages;(125,000);Interest on accounts payable;(2,000);Payroll and property taxes;(45,000);Supplies;(26,000);Rent on retail building;(20,000);Depreciation on furniture and fixtures;(15,400);Advertising;(4,000);Guaranteed payments to Thomas Kyle;(40,000);Utilities;(16,000);Accounting and legal services;(5,000);Meals and entertainment;(500);Charitable Contributions;(375);Miscellaneous expense;(425);Total expenses;(299,700);Net Income for Books;368,800


Paper#41030 | Written in 18-Jul-2015

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