Corporate Tax Returns –

Corporate Tax Returns
Corporate Tax Return through
Part 1: Trust and Estate Corporate Return
Part 2: Partnership Return.
Trust and Estates – Part 1 (175 Points)
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
Please note there is a limit of 5 returns per session.
PART I – Tax Return #1, Corporate Return
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
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
Tasty Treats and Beverages, Inc.
Balance Sheet
December 31, 2013
ASSETS January 2013 December 2013
Cash 175,000 190,000
Accounts Receivable 63,000 54,000
Allowance for doubtful accounts (8,000) (7,000)
Inventory 225,000 275,000
US government bonds 30,000 25,000
State and local bonds 50,000 50,000
Investments in stock 325,000 335,000
Fixed assets 475,000 485,000
Accumulated depreciation (198,000) (215,000)
Other assets 11,000 12,000
Total assets 1,148,000 1,204,000
Liabilities and Stockholder’s Equity
Accounts payable 225,000 200,000
Other current liabilities 135,000 55,000
Other liabilities 75,000 68,263
Capital stock 250,000 250,000
Retained earnings 463,000 630,737
Total liabilities and stockholder’s equity 1,148,000 1,204,000
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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