Answered Essay: Assignment Choice #1: Corporate Tax Returns

Assignment Choice #1: Corporate Tax Returns

Because it is important for accountants to demonstrate the filing requirements for specialized tax returns, for this final project you will be completing a corporate tax return and then analyzing this experience. Key Component: Use the financial data from the following file to complete form 1120.

Complete the following template that has the respective tax forms and schedules required to complete the return. Complete all of the parts of your respective business tax return for which there is information.

Show your income tax calculations Prepare a write-up on:

The purpose of questions on Form 1120 Schedule K with the exception of line 1. (You may select a sub-grouping of these questions to complete your milestone.)

Some challenges (identify three to five), both anticipated and unexpected, when completing the corporate tax return.

Solutions you can provide to those challenges.

Requirements: Submit 1) your tax return template and

2) Income tax calculations, and

3) your write-up about the tax return questions to the drop box identified for that submission.

Entity Type: Corporation
Sub-Entity Type: None
Entity Name: BADEC
State of Formation Georgia
Entity Start Date 4/2/2013
Tax Year Start Date: 4/2/2013
Tax Year End Date: 12/31/2013
Book Maintained By: Andrew Anderson
Address: 10 Sysco Way Atlanta, GA 30039
Purpose of Entity Acquire, rehabilitate and resale residential real property.
Corporate Information
Dividends Received from investment in a domestic corporations with ownership = 70%
Estimated Tax Payments $6,000
First Name Last Name SSN Address City State Zip Shareholder Information
Andrew Anderson 756-12-1111 10 Sysco Way Atlanta GA 30039 Shareholder
Bill Bacon 756-12-2222 20 Sysco Way Atlanta GA 30039 Shareholder
Cathy Cox 756-12-3333 30 Sysco Way Atlanta GA 30039 Shareholder
Doris Day 756-12-4444 40 Sysco Way Atlanta GA 30039 Shareholder
Elroy Elders 756-12-5555 50 Sysco Way Atlanta GA 30039 Shareholder
Farah Fawcett 756-12-6666 60 Sysco Way Atlanta GA 30039 Shareholder
Gomez Gonzalez 756-12-7777 70 Sysco Way Atlanta GA 30039 Shareholder
Investor Contribution Date Contribution 1 Contribution 2 Contribution 3 Contribution 4 Net Contributions Sharholder Interest
First Name Last Name SSN Item Value Item Value Item Value Item Value
Andrew Anderson 756-12-1111 4/2/2013 Cash $50,000 $50,000 10%
Bill Bacon 756-12-2222 4/2/2013 Cash $150,000 $150,000 31%
Cathy Cox 756-12-3333 4/2/2013 Cash $100,000 $100,000 20%
Doris Day 756-12-4444 4/2/2013 Cash $50,000 $50,000 10%
Elroy Elders 756-12-5555 4/2/2013 Cash $40,000 $40,000 8%
Farah Fawcett 756-12-6666 4/2/2013 Cash $30,000 Land $50,000 $80,000 16%
Gomez Gonzalez 756-12-7777 4/2/2013 Cash $10,000 Computer $7,000 Furniture $3,000 $20,000 4%
100%
BADEC, Inc
4/2/2013
Assets
Cash $    430,000
Computer $        7,000
Furniture $        3,000
Land $      50,000
   Total Assets $    490,000
Liabilities
Equity
Capital-Anderson $      50,000
Capital-Bacon $    150,000
Capital-Cox $    100,000
Capital-Day $      50,000
Capital-Elders $      40,000
Capital-Fawcett $      80,000
Capital-Gonzalez $      20,000
   Total Liabilities plus Equity $    490,000
BADEC, Inc.
04/02/2013 – 12/31/2013
Gross Income
Repair Revenue $100,000
Interest Income $600
Dividends (Qualified) $2,000
Net Short-term Capital Gain $5,000
Total Income from all sources $107,600
Expenses
Guaranteed payments $10,000
Renovation Expense $5,500
Rent $1,500
Depreciaton expense $2,066
Licenses $500
Travel Expenses $800
Supplies Expenses $700
Net Long-term Capital Loss $10,000
Charitable Contributions $5,000
Total Expenses $36,066
Net Income (before federal income taxes) $71,534
BADEC Partnership
12/31/2013
Assets
Cash $    485,600
Computer $        7,000
AccDep-Computer $      (1,745)
Furniture $        3,000
AccDep-Furniture $         (321)
Land $      50,000
   Total Assets $    543,534
Liabilities
Equity
Retained Earnings $      53,534
Stock-Anderson $      50,000
Stock-Bacon $    150,000
Stock-Cox $    100,000
Stock-Day $      50,000
Stock-Elders $      40,000
Stock-Fawcett $      80,000
Stock-Gonzalez $      20,000
   Total Liabilities plus Equity $    543,534

Expert Answer

 

Assessee Deails
Income period
4/2/2013 to 12/31/2013
Entity Name
BADEC Inc
Address
10 Sysco Way Atlanta, GA 30039
City
Atlanta
Date Incorporated
4/2/2013
Total Asset
$490,000.00
EI No.

Computation of Income tax

SL Particulars Amt ($) Amt ($)
A. Gross Receipts                                             100,000.00
Cost of Goods Sold                                                              –
Balance    100,000.00
Dividend                                                 2,000.00
Interest                                                     600.00
Capital Gain                                                 5,000.00
Total Income    107,600.00
B. Repair and Maintenance                                                 5,500.00
Rent                                                 1,500.00
Taxes and Licenses                                                     500.00
Charitable Contribution                                                 5,000.00
Depreciation                                                 2,066.00
Other Deduction                                                 1,500.00
Total Deduction      16,066.00
C. Taxable Income      91,534.00
D. Special Deduction: Dividend from 20% or more owned domestic corporation        1,600.00
E. Net taxable Income      89,934.00
F. Tax Computation
15% upto 50000                                                 7,500.00
25% upto 75000 above 50000                                                 6,250.00
34% upto 100000 above 75000                                                 5,077.56
Total Tax Payable      18,827.56

Write-up on Schedule K Form 1120

  1. Business Details: These are to know the nature of business. There is a list of Principal business activity Codes in the instruction which can be used to fill this form
  2. Parent-subsidiary details : This is required to state if the company is a subsidiary of a parent group but not providing consolidated returns. The details of exemption needs to be provided
  3. Constructive ownership of corporation: The purpose of this question is to check if the constructive ownership rules of Sec 267© (3) apply to the organization
  4. Constructive ownership of Other Entities: For purposes of determining the corporation’s constructive ownership of other entities, the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in partnerships and trusts as well as corporate stock. Generally, if an entity (a corporation, partnership, or trust) is owned, directly or indirectly, by or for another entity (corporation, partnership, estate, or trust), the owned entity is considered to be owned proportionately by or for the owners (shareholders, partners, or beneficiaries) of the owning entity.
  5. Dividend Payments: This is to determine if the corporation has paid dividend from previous year’s surplus/profits.
  6. Foreign Ownership: The constructive ownership Rules of Sec 318 apply in determining is a corporation is foreign owned
  7. This is to state if the corporation issued debt instruments publically at a discount.
  8. This requires details of tax emempted interest income during the year
  9. This requires the number of shareholders if less than 100
  10. If the corporation has NOL it generally can elect to waive the entire carryback period for the NOL and instead carry the NOL forward to future tax years.
  11. This requires the amount of NOL carried forward from prior year to tax year, iresective whether some loss has been setoff in this year
  12. A corporation that files Form 1120 must file Schedule UTP (Form 1120), Uncertain Tax Position Statement, with its 2016 income tax return if:
  13. For 2016, the corporation’s total assets equal or exceed $10 million;
  14. The corporation or a related party issued audited financial statements reporting all or a portion of the corporation’s operations for all or a portion of the corporation’s tax year; and
  15. The corporation has one or more tax positions that must be reported on Schedule UTP
  16. If the corporation made any payments in 2016 that would require filing of form(s) 1099.
  17. This requires details of change of substantial ownership – 80% or more
  18. This requires if the corporation has disposed of more than 65% of its total asset during the FY
  19. This requires details of 351 transfer where fair market value is more than$1 million
  20. This requires details if the corporation made any payments that required filing forms 1042 and 1042S.
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