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ACC 302 Corp_and_S-Corp_Tax_Return Financial_Statements

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Question;SUBDOMAIN 302.2 - FEDERAL INCOME TAXCompetency 302.2.4: Tax Treatments for Corporations - The student determines tax treatments for corporations.Objectives:302.2.4-01: Calculate taxable income or loss for a corporation.302.2.4-02: Calculate taxable income or loss for an s-corporation.302.2.4-03: Reconcile book income and taxable income for a corporation.302.2.4-04: Reconcile book income and taxable income for an s-corporation.302.2.4-05: Calculate the tax treatment for net operating losses and distributions to shareholders for a corporation.302.2.4-07: Calculate special deductions allowed a corporation.302.2.4-08: Calculate special deductions allowed an s-corporation.302.2.4-09: Calculate the tax treatment limitations for expense items on the corporate tax return.302.2.4-10: Calculate the tax treatment for capital gains and losses for a corporation and s-corporation.Given:On January 1, Year 10, ABC Company applied for and was granted a charter to begin business as a corporation changing from the original sole proprietorship business form. (The Year 10 Income Statement and Balance Sheet are given in the attached document ?Corp and S-Corp Tax Return?Financial Statements.?).During the organization of ABC Company as a Corporation, the company incurred legal expenses in the amount of $15,000, state filing fees in the amount of $2,000, accounting fees in the amount of $5,000, and printing expenses related to the sale of stock certificates in the amount of $2,500. The Year 10 corporate balance sheet includes the organization costs. The corporation will take advantage of any allowed expense for the year on its Year 10 tax return. No amortization will be recognized in this first year of incorporation.During Year 10 the following transactions occurred:? A fire broke out in the retail store causing $200,000 in damages. ABC Corporation received $80,000 from the insurance company for damages.? ABC Corporation donated $50,000 to a homeless shelter for improvements.The original ABC Company had the following short- and long-term gains and losses:Year 5?Net short-term capital gain?$20,000Year 6?Net long-term capital loss?$15,000Year 7?Net long-term capital gain?$10,000Year 8?Net short-term capital loss?$25,000Year 9?Net short-term capital gain?$30,000ABC Corporation received $75,000 in dividends from XYZ Corporation. ABC owns 20% of XYZ.At the end of the year, the ABC Corporation board of directors is considering applying for S-Corporation status with the IRS.Task:Note: For all calculations in this task, assume a marginal tax rate of 20%.A. Using the financial statements provided (see the attached document ?Corp and S-Corp Tax Return Template?), correctly perform the following calculations for ABC as a corporation:Taxable income or loss for ABC as a corporationSpecial tax deductions allowed for ABC as a corporationTax treatment of capital gains and losses for ABC as a corporation (Capital gains/losses do not apply to the corporation. They would have been closed out with the change of business form.)The expense item limitations on a corporate tax return for ABC as a corporationB. Using the financial statements provided (see the attached document ?Corp and S-Corp Tax Return Template?), correctly perform the following calculations for ABC as an s-corporation:Taxable income or loss for ABC as an s-corporationSpecial tax deductions allowed for ABC as an s-corporationTax treatment of capital gains and losses for ABC as an s-corporationThe expense item limitations on a corporate tax return for ABC as an s-corporation

 

Paper#42746 | Written in 18-Jul-2015

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