Reference no: EM131582375

Real Running Gear Corp. Federal Tax Return

FACTS

Alice Boyd developed and patented a line of specialized running attire. The attire is constructed for durability and quick wicking and is made of highly reflective materials for night-time use. Alice set up Real Running Gear Corp (RRG) to manufacture and sell her product. RRG is a small, closely-held manufacturer (the business code number is 339900, and the employer identification number is 11- 1111111). The company is located at 325 Ground Road, Cedar City, Utah 84721. The corporation, which uses a calendar year for tax purposes, has been an S corporation since its incorporation on August 2, 2010.

Alice (social security number 111-11-1111) is president of the corporation. Alice owned 100% of the stock until September 15, 2014 when she sold 5% to Candice Boyd (Alice's sister, social security number 222-22-2222), who serves as vice president for the company. Both officers devote 100 percent of their time to the corporation and live at 333 Opportunity Street, Cedar City, Utah 84720. Annual compensation is $80,000 for Alice and $40,000 for Candice. The corporation does not engage in activities to which the at-risk or passive activity loss limitations apply.

RRG files its tax return on the accrual method. Inventory has been consistently valued at cost under the FIFO method using the full absorption procedure. Inventory capitalization rules of Internal Revenue code Section 263A do not apply due to the 'small business exception' (average annual gross receipts for the three preceding taxable years do not exceed $10 million). The accounting records are computerized.

REQUIRED

From the above information, prepare RRG's 2014 Federal income tax return (Form 1120S), including all forms, schedule and supporting statements as indicated below. Unless otherwise noted, assume RRG makes all available elections to minimize the shareholders' current taxable income. Round amounts to the nearest dollar. If additional information is needed, make realistic assumptions and fill in all required data.

Even though the corporation may not be technically required to do so, Alice has expressed a desire that Schedule L (Balance Sheets), Schedule M-1 (Reconciliation of Income (Loss) per Books With Income (Loss) per Return), and Schedule M-2 (Analysis of Accumulated Adjustments Account, Other Adjustments Account, and Shareholders' Undistributed Taxable Income Previously Taxed) on Form 120S, p.5 be completed.

Attachment:- Assignment.rar