Portfolio Project: Trust and Estates – Part 1
For this assignment, you will complete two tax returns (Corporation Return and Partnership Return), . 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
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Tasty Treats and Beverages, Inc. |
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Income Statement |
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For year ended December 31, 2013 |
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Revenue from sales |
1,500,000 |
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Sales returns and allowances |
(25,000) |
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Cost of goods sold |
(325,000) |
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Gross profit from operations |
1,150,000 |
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Other Income: |
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Capital loss |
(7,500) |
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Dividend income |
15,000 |
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Interest income |
12,000 |
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Gross income |
1,169,500 |
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Expenses: |
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Compensation |
(750,000) |
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Depreciation |
(12,000) |
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Bad debt expense |
(7,800) |
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Meals and entertainment |
(3,000) |
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Maintenance |
(2,500) |
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Property taxes |
(10,000) |
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State income taxes |
(30,000) |
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Other taxes |
(11,000) |
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Rent |
(28,000) |
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Interest |
(7,300) |
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Advertising |
(6,200) |
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Professional services |
(5,000) |
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Employee benefits |
(8,000) |
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Supplies |
(2,500) |
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Other expenses |
(1,750) |
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Total expenses |
(885,050) |
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Income before taxes |
284,450 |
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Federal income tax expense |
96,713 |
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Net income after taxes |
187,737 |
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Tasty Treats and Beverages, Inc. |
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Balance Sheet |
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December 31, 2013 |
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ASSETS |
January 2013 |
December 2013 |
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Cash |
175,000 |
190,000 |
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Accounts Receivable |
63,000 |
54,000 |
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Allowance for doubtful accounts |
(8,000) |
(7,000) |
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Inventory |
225,000 |
275,000 |
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US government bonds |
30,000 |
25,000 |
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State and local bonds |
50,000 |
50,000 |
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Investments in stock |
325,000 |
335,000 |
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Fixed assets |
475,000 |
485,000 |
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Accumulated depreciation |
(198,000) |
(215,000) |
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Other assets |
11,000 |
12,000 |
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Total assets |
1,148,000 |
1,204,000 |
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Liabilities and Stockholder’s Equity |
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Accounts payable |
225,000 |
200,000 |
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Other current liabilities |
135,000 |
55,000 |
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Other liabilities |
75,000 |
68,263 |
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Capital stock |
250,000 |
250,000 |
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Retained earnings |
463,000 |
630,737 |
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Total liabilities and stockholder’s equity |
1,148,000 |
1,204,000 |
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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 originally 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.
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