Portfolio Project: Trust and Estates - Part 1
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 http://accountants.intuit.com/tax/proseries/
Please note there is a limit of 5 returns per session.
PART I - Tax Return #1, Corporate Return? ?Background
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:
• Jane is the chief executive officer and president (Social Security number 242-62-5786).
• James is the executive vice president and chief operating officer (Social Security number 563-58-8923).
• 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
|
Additional Information
• 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.
• 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.
• 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.
• On September 1, 2013, the corporation sold 1,000 shares of its ABC stock for $15,000. It had originality
purchased these shares on June 13, 2006, for $7,500. After the sale, the Corporation owned 9 percent of ABC.
• compensation is as follows:
* Jane $175,000
* James $150,000
* Steve $150,000
* Other $275,000
• The Corporation wrote off $10,000 in accounts receivable as uncollectible during the year.
• Regular tax depreciation was $28,000. None of the depreciation should be claimed on Form 1125A.
• The $7,300 interest expense was from a business loan.
• 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