Tax project -Valerie Lawson and Clara Norman are the sole equal shareholders in the corporation of Lawson

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CORPORATION INCOME TAXATION

SPRING SEMESTER 2014

INCOME TAX PROJECT

Project 1

FACTS

Valerie Lawson and Clara Norman are the sole equal
shareholders in the corporation of Lawson And Norman Enterprises, Inc. The corporation, which is a retail office
supplies and stationery store, began its operations on January 2, 1985 (also
date of incorporation). For Federal
Income Tax purposes, the corporation is a calendar year taxpayer and uses the
Accrual Method Of Accounting. Its Employer
Identification Number is 76-1234567, address is 4369 Robbie Lane Houston, Texas
77026-3915, telephone number is (281) 479-8132, fax number is (281) 567-9024
and E-Mail address is “lawsonandnormanenterprises.com“. The business activity code for the
corporation is 453210. Valerie Lawson is
the president of the corporation and its contact person for Federal Income Tax
purposes and Clara Norman is the secretary and treasurer of the
corporation. Both are full-time
employees of the corporation devoting one hundred percent (100%) of their time
to the business and each has an annual salary of $75,000. Valerie Lawson’s social security number is 234-56-7890
and her address is 8124 Annette Court Houston, Texas 77031-9475. Clara
Norman has social security number of 890-12-3456 and her address is 2716
Nanette Drive Houston, Texas
77061-3459.

FINANCIAL INFORMATION

During the year of 2013, Lawson And Norman Enterprises,
Inc. reported the following Income and Expenses (including necessary accruals)
for Financial Accounting purposes:

Gross
Receipts $1,482,000

Sales
Returns And Allowances 109,000

Purchases 510,000

Dividends
Received From Stock (Not Qualified Dividends)

Investments
In Less Than twenty percent (20%)

Owned United States
(U. S.) Corporation 80,000

Interest
Income:

Taxable
Interest 18,000

Tax-Exempt
Interest 7,200

Salaries: Officers
150,000

Other Employees 108,000

Repairs
And Maintenance 19,300

Rent
Expense – Office 84,000

Rent
Expense – Equipment 15,500

Payroll
Taxes (Federal And State) 19,600

Interest
Expense 25,200

Advertising
Expense 44,500

Charitable
Contributions 48,000

Legal
And Professional Fees 28,800

Depreciation
Expense 50,000 *

Utilities
Expense
27,300

Employee’s
Health Insurance Premiums 14,200

Entertainment
Of Clients 5,000

Officers’ Life Insurance Premiums 14,400 **

-1-

* – Based upon Straight-Line Depreciation, a useful
life of five (5) years and no salvage value for all assets (see specific assets below).

** – Lawson And Norman Enterprises, Inc. Is The
Designated Beneficiary.

The Lawson And Norman Enterprises, Inc. owns the following
depreciable assets:

ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST

Automobile – 2012 Lexus 460 April 1, 2012 $
50,000

(Five-year Property)

Automobile – 2012 Cadillac Seville April 1, 2012 50,000

(Five-year Property)

Furniture And Fixtures May 1, 2011 150,000

(Seven-year Property)

Each automobile was used a total of 18,000 miles during
the year of 2013 all which were business miles.
The automobiles were not available for personal use during off-duty
hours and were used solely by Valerie Lawson and Clara Norman, who both have
another vehicle available for personal use. For Federal Income Tax purposes,
all of these assets are depreciated using the Modified Accelerated Cost Recovery
System (MACRS). Section 179 Deduction
was not elected in regards to any of these assets nor was Straight-Line
Depreciation used.

BALANCE SHEETS

The Balance Sheets (Financial Accounting) for the Lawson
And Norman Enterprises, Inc. at the beginning and ending of the year of 2013
are as follows:

ASSETS January
1
December 31

Cash
$ 36,000 $
84,000

Trade Notes And Accounts Receivable 96,000
90,000

Inventory (Valued
At Cost) * 120,000 100,000

Marketable Securities – Long Term 140,000 170,000

Depreciable Assets (And Land) 260,000 ** 260,000 **

Less: Accumulated Depreciation (65,000) (115,000)

Other Assets (Deposits) 12,000 12,000

————
————-

TOTAL ASSETS $ 599,000 $ 601,000

=======
=======

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts Payable (Non Recourse) $
96,000 $ 116,200

Federal Income Taxes Payable 8,600
?

Notes Payable – Short Term (Recourse) 16,000 24,000

Notes Payable – Long Term (Recourse) 164,000 212,000

Common Stock 10,000 10,000

Retained Earnings (Unappropriated) 304,400 229,042

TOTAL LIABILITIES AND ———— ————

STOCKHOLDERS’ EQUITY $
599,000 $ 601,000

======= =======

* – The rules of
Section 263A of the Internal Revenue Code do not apply to the corporation.

** – Includes $10,000 allocated to Land.

-2-

ESTIMATED TAX PAYMENTS

During 2013, Lawson And Norman Enterprises, Inc. made
the following estimated tax payments:

April
15, 2013 $30,000

June
17, 2013 $20,000

September
16, 2013 $20,000

December
16, 2013 $10,000

The 2012 Federal Income Tax liability for Lawson And Norman
Enterprises, Inc. was $76,800 and no overpayment of 2012 Federal Income Tax is
being applied to the 2013 Federal Income Tax liability of Lawson And Norman
Enterprises, Inc.

OTHER INFORMATION

Both shareholders of Lawson And Norman Enterprises, Inc.
are United States
Citizens. Lawson And Norman Enterprises,
Inc. does not own directly or indirectly fifty percent (50%) or more of the
voting stock in any other domestic corporation and the corporation is not a
subsidiary in an affiliated group or a parent-subsidiary controlled group.
During the year of 2013, Lawson And Norman Enterprises, Inc. paid cash
dividends of $280,000 ($140,000 to each shareholder) and the corporation did
not pay dividends in excess of the corporation’s Current Earnings And Profits
and Accumulated Earnings And Profits. In
addition, Lawson And Norman Enterprises, Inc. is not a shareholder in any
foreign corporation nor has any interest in or a signature or other authority
over any financial account in a foreign country. Furthermore, during the year
of 2013, the corporation did not receive a distribution from nor was a grantor
of, or transferor to, a foreign trust.
Moreover, Lawson And Norman Enterprises, Inc. did not issue publicly
offered debt instruments with original issue discount. Finally, the corporation
had no Net Operating Losses (NOL’s) carryover from prior tax years.

REQUIRED

Prepare the C (Regular) Corporation Tax Return for the Lawson
And Norman Enterprises, Inc. for the tax year of 2013. The following Forms are needed to complete
the Tax Return:

Form 1120

Form 1125-A

Form 1125-E

Schedule G

Form 4562

Form 4626

CHECK FIGURES

FORM 1120

INCOME (Page 1)

1. Total Income
(Line 11): $941,000.

DEDUCTIONS (Page 1)

1. Charitable
Contributions (Line 19): $36,566.

2. Depreciation
(Line 20): $36,437. (Also Line 22 – Form 4562)

3. Total
Deductions (Line 27): $611,903.

4. Taxable Income
(Line 30): $273,097.

SCHEDULE M-1 (Page 5)

1. Net Income
(Loss) Per Books (Line 1): $204,642.

2. Expenses
Recorded On Books This Year

Not Deducted
On This Return (Itemize) (Line 5): $41,897.

SCHEDULE M-2 (Page 5)

1. Balance At End
Of Year (Line 8): $229,042.

CORPORATION INCOME TAXATION

SPRING SEMESTER 2014

INCOME TAX PROJECT

Project 2

FACTS

Valerie Lawson and Clara Norman are the sole equal
shareholders in the corporation of Lawson And Norman Enterprises, Inc. each
owning one hundred (100) shares of common stock of the corporation. The corporation, which is a retail office
supplies and stationery store, began its operations on January 2, 1985 (also
date of incorporation). For Federal Income
Tax purposes, the corporation is a calendar year taxpayer, uses the Accrual
Method Of Accounting and, since its year of inception, properly elected and
maintained the S Corporation status. Its
Employer Identification Number is 76-1234567, address is 4369 Robbie Lane
Houston, Texas 77026-3915, telephone number is (281) 479-8132, fax number is (281)
536-1908 and E-Mail address is “lawsonandnormanenterprises.com“. The business activity code for the
corporation is 453210. Valerie Lawson,
who is the designated Tax Matters Person for the corporation, has social
security number of 234-56-7890, her address is 8124 Annette Court Houston, Texas77031-9475 and her telephone number is (832) 246-8015. Clara Norman has social security number of 890-12-3456,
her address is 2716 Nanette Drive Houston, Texas 77061-3459 and her telephone number is (832)
623-5097.

FINANCIAL INFORMATION

During the year of 2013, the Lawson And Norman
Enterprises, Inc. reported the following Income and Expenses (including
necessary accruals) for Financial Accounting purposes:

Gross
Receipts $1,482,000

Sales
Returns And Allowances 109,000

Purchases 510,000

Dividends
Received From Stock (Not Qualified Dividends)

Investments
In Less Than twenty percent (20%)

Owned United States
(U. S.) Corporation 80,000

Interest
Income:

Taxable
Interest (Bank) 18,000

Tax-Exempt
Interest 7,200

Salaries: Valerie Lawson
75,000

Clara Norman 75,000

Other Employees 108,000

Repairs
And Maintenance 19,300

Rent
Expense – Office 84,000

Rent
Expense – Equipment 15,500

Payroll
Taxes (Federal And State) 19,600

Interest
Expense (Trade Or Business Interest) 25,200

Advertising
Expense 44,500

Charitable
Contributions (“50%” Charities) 48,000

Legal
And Professional Fees 28,800

Depreciation
Expense 50,000 *

Utilities
Expense
27,300

Employee’s
Health Insurance Premiums 14,200

Entertainment
Of Clients
5,000

Officers’ Life Insurance Premiums 14,400 **

-1-

* – Based upon Straight-Line
Depreciation, a useful life of five (5) years and no salvage value for all assets (see specific assets below).

** – Lawson And Norman Enterprises, Inc. Is The
Designated Beneficiary.

No additional capital contributions were made during the
year of 2013 and each shareholder made a total of $140,000 (all cash)
withdrawals throughout the course of the year of 2013.

The Lawson And Norman Enterprises, Inc. owns the
following depreciable assets:

ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST

Automobile – 2012 Lexus 460 April 1, 2012 $
50,000

(Five-year Property)

Automobile – 2012 Cadillac Seville April
1, 2012 50,000

(Five-year Property)

Furniture And Fixtures May 1, 2011 150,000

(Seven-year Property)

Each automobile was used a total of 18,000 miles during
the year of 2013 all which were business miles.
The automobiles were not available for personal use during off-duty
hours and were used solely by Valerie Lawson and Clara Norman, who both have
another vehicle available for personal use. For Federal Income Tax purposes,
all of these assets are depreciated using the Modified Accelerated Cost
Recovery System (MACRS). Section 179
Deduction was not elected in regards to any of these assets nor was
Straight-Line Depreciation used.

BALANCE SHEETS

The Balance Sheets (Financial Accounting) for the Lawson
And Norman Enterprises, Inc. at the beginning and ending of the year of 2013
are as follows:

ASSETS January 1
December 31

Cash $ 36,000 $
84,000

Trade Notes And Accounts Receivable 96,000 90,000

Inventory (Valued
At Cost) * 120,000 100,000

Marketable Securities – Long Term 140,000 250,000

Depreciable Assets (And Land) 260,000 ** 260,000 **

Less: Accumulated Depreciation (65,000) (115,000)

Other Assets (Deposits) 12,000
12,000

————
————

TOTAL ASSETS $ 599,000 $ 681,000

=======
=======

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts Payable (Non Recourse) $ 96,000 $ 116,200

Notes Payable – Short Term (Recourse) 24,600
24,000

Notes Payable – Long Term (Recourse) 164,000 212,000

Capital Stock 10,000 10,000

Retained Earnings (Unappropriated) 304,400 *** 318,800

TOTAL LIABILITIES AND ———— ————

SHAREHOLDERS’ EQUITY $
599,000 $ 681,000

=======
=======

* – The rules
of Section 263A of the Internal Revenue Code do not apply to the corporation.

** – Includes
$10,000 allocated to Land.

-2-

*** – The beginning Retained Earnings (Unappropriated)
balance was allocated to tax accounts of Lawson And Norman Enterprises,
Inc. as follows:

Accumulated
Adjustments Account $286,800

Other
Adjustments Account 17,600

OTHER INFORMATION

Both shareholders are United States citizens and the
corporation does not own directly or indirectly fifty percent (50%) or more of
the voting stock in any other domestic corporation. In addition, Lawson And Norman
Enterprises, Inc. was not a member of a controlled group that is subject to the
provisions of Section 1561 of the Internal Revenue Code. During the year of 2013, the corporation had
no interest in or a signature or other authority over any financial account in
a foreign country. Furthermore, the
corporation did not receive a distribution from, nor was the grantor of, or
transferor to, a foreign trust during the year of 2013. The corporation has not filed nor is
required to file Form 8264 – Application For Registration Of A Tax Shelter and
the corporation did not issue publicly offered debt instruments with original
issue discount. Finally, no estimated
tax payments were made during the tax year of 2013 by the corporation for
itself or on behalf of any of the shareholders of the corporation.

REQUIRED

Prepare the S Corporation Tax Return for the Lawson And Norman
Enterprises, Inc. for the year of 2013 and Schedule K-1 for both
shareholders. The following Forms are
needed to complete the Tax Return:

Form 1120S

Form 1125-A

Schedule K-1 (Form 1120S) (2)

Form 4562

CHECK FIGURES

FORM 1120S

INCOME (Page 1)

1. Total Income
(Loss) (Line 6): $843,000.

DEDUCTIONS (Page 1)

1. Depreciation
(Line 14): $36,437. (Also Line 22
– Form 4562)

2. Total
Deductions (Line 20): $575,337.

3. Ordinary
Income (Loss) (Line 21): $267,663.

SCHEDULE K (Page 2 – Page 3)

1. Interest
Income (Line 4): $18,000.

2. Ordinary
Dividends (Line 5a): $80,000.

3. Charitable
Contributions (Line 12a): $48,000.

4 Total Property
Distributions (Including Cash) Other Than Dividends (Line 16d): $280,000.

5. Income (Loss)
(Line 18): $317,663.

SCHEDULE M-1 (Page 4)

1. Net Income
(Loss) Per Books (Line 1): $294,400.

2. Expenses
Recorded On Books This Year

Not Included
On Schedule K (Itemize) (Line 3): $30,463.

SCHEDULE M-2 (Page 4)

1. Balance At End
Of Year (Line 8):

(a)
Accumulated Adjustments Account: $308,400.

(b) Other
Adjustments Account: $10,400.

SCHEDULE K-1 (Each) (Page 1)

1. Ordinary
Income (Loss) From Trade Or Business (Line 1): $133,831.

2. Interest
Income (Line 4): $9,000.

3. Ordinary
Dividends (Line 5a): $40,000.

4. Charitable
Contributions (Line 12): $24,000.

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