Reference no: EM132340035
Corporation Income Taxation - Income Tax Project
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 2018, Lawson And Norman Enterprises, Inc. reported the following Income and Expenses (including necessary accruals) for Financial Accounting purposes:
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Gross Receipts
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$1,482,000
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Sales Returns And Allowances
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109,000
|
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Purchases
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510,000
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Dividends Received From Stock (Not Qualified Dividends)
Investments In Less Than twenty percent (20%)
Owned United States (U. S.) Corporation 80,000
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80,000
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Interest Income:
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|
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Taxable Interest
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18,000
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Tax-Exempt Interest
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7,200
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Salaries: Officers
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150,000
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Other Employees
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108,000
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Repairs And Maintenance
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19,300
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Rent Expense - Office
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84,000
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Rent Expense - Equipment
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15,500
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Payroll Taxes (Federal And State)
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19,600
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Interest Expense
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25,200
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Advertising Expense
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44,500
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Charitable Contributions
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48,000
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Legal And Professional Fees
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28,800
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Depreciation Expense
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50,000 *
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Utilities Expense
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27,300
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Employee's Health Insurance Premiums
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14,200
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Entertainment Of Clients
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5,000
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Officers' Life Insurance Premiums
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14,400 **
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* - 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:
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ASSET DESCRIPTION
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DATE ACQUIRED
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ORIGINAL COST
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Automobile - 2017 Lexus 460 (Five-year Property)
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April 1, 2017
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$ 50,000
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Automobile - 2017 Cadillac Seville (Five-year Property)
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April 1, 2017
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50,000
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Furniture And Fixtures (Seven-year Property)
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May 1, 2016
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150,000
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Each automobile was used a total of 18,000 miles during the year of 2018 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 2018 are as follows:
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ASSETS
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January 1
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December 31
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Cash
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$36,000
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$84,000
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Trade Notes And Accounts Receivable
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96,000
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90,000
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Inventory (Valued At Cost) *
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120,000
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100,000
|
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Marketable Securities - Long Term
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140,000
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170,000
|
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Depreciable Assets (And Land)
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260,000 **
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260,000 **
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Less: Accumulated Depreciation
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(65,000)
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(115,000)
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Other Assets (Deposits)
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12,000
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12,000
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TOTAL ASSETS
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$599,000
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$601,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
Accounts Payable (Non Recourse)
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$96,000
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$92,200
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Federal Income Taxes Payable
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8,600
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?
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Notes Payable - Short Term (Recourse)
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16,000
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24,000
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Notes Payable - Long Term (Recourse)
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164,000
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212,000
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Common Stock
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10,000
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10,000
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Retained Earnings (Unappropriated)
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304,400
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258,090
|
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$599,000
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$601,000
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* - The rules of Section 263A of the Internal Revenue Code do not apply to the corporation.
** - Includes $10,000 allocated to Land.
ESTIMATED TAX PAYMENTS - During 2018, Lawson And Norman Enterprises, Inc. made the following estimated tax payments:
April 15, 2018 - $20,000
June 15, 2018 - $16,000
September 15, 2018 - $10,000
December 15, 2018 - $10,000
The 2017 Federal Income Tax liability for Lawson And Norman Enterprises, Inc. was $52,800 and no overpayment of 2017 Federal Income Tax is being applied to the 2018 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 2018, 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 2018, 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 2018. The following Forms are needed to complete the Tax Return:
Form 1120
Form 1125-A
Form 1125-E
Schedule G (Form 1120)
Form 4562
Attachment:- Taxation Project Assignment File.rar