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ACC - CCS Corporate Tax Return Problem - Rachael Ray, Paula Deen and Gordon Ramsay




Question;CCS Corporate Tax Return Problem Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS is incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events. ? CCS is located at 540 Waverly Way Burbank, CA 91501 ? Its employer ID is 38-4743474 ? CCS?s business activity is catering food services. Its business activity code is 722300. ? The shareholders also work as officers for the corporation as follows: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000. ? All officers devote 100% of their time to the business and all of the officers are US citizens. ? CCS uses the accrual method of accounting and has a calendar year-end. ? CCS made four equal quarterly estimated tax payments of $20,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund. ? CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution. The following is CCS?s income statement for 2012: Income Statement Income Sales $1,800,000 Sales returns and allowances (5,000) Net sales 1,795,000 Cost of goods sold 350,000 Gross profit 1,445,000 Capital loss ($15,000) Dividend income 25,000 Interest income 10,000 Total income $1,465,000 Expenses Salaries-officers $470,000 Salaries and wages ? other 525,000 Bad Debt 15,000 Meals & Entertainment 3,000 Repairs and Maintenance 6,000 2 | PageProperty Taxes 13,000 State Income Tax 43,000 Other Taxes 44,000 Rent 30,000 Interest 5,000 Advertising 52,000 Professional Services 16,000 Supplies 5,000 Depreciation 10,000 Employee benefits Programs 32,000 Other Expenses 12,000 Total expenses 1.281,000 Net income before taxes $184,000 Federal income taxes [62,000] Net income after taxes $122,000 Notes: 1. CCS?S inventory-related purchases during 2012 were $360,000. It values its i


Paper#41908 | Written in 18-Jul-2015

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