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2017 S CORPORATION TAX RETURN PROBLEM Facts William Spicer (SS# 123-45-5789) owns 80 percent of the...

2017 S CORPORATION TAX RETURN PROBLEM

Facts

William Spicer (SS# 123-45-5789) owns 80 percent of the stock in Bill’s Market, an accrual basis gourmet food market operating as an S Corporation. It is located at 387 Spring Street, Raleigh,

NC 29288. William’s wife, June (SS# 987-65-4321), owns the other 20 percent of the outstanding stock of the corporation but she is not active in the business. The Market’s EIN is

79-7979797 and its business code is 445290. It was incorporated on July 15, 2006 an elected Corp status on that date.

During 2017, the Market had the following results from its operations:

Gross sales ($1,300,000 from credit card sales) $3,700,000

Merchandise purchases 2,480,000

Expenses:

Advertising $40,000

Charitable contributions 2,000

Cleaning/maintenance 12,000

Depreciation (MACRS pre-2017 purchases) 3,000

Section 179 expense (2/1/17 display case) 5,000

Payroll taxes (excluding FICA on William’s salary) 18,000

FICA on William’s salary 10,247

William’s salary 200,000

Health insurance 15,000*

Insurance (excludes health) 18,000

Interest expense 1,000

Licenses/fees 4,000

Meals/entertainment 10,000

Office expenses 14,000

Rent 120,000

Salary/wages 210,000

Travel 8,000

Utilities 32,000

*Includes $3,000 for health insurance for William and his family.

The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000 when purchased on March 5, 2013; it had an adjusted basis of $3,000 when sold on August 15, 2017.

The Market also sold a display case for $1,000 on December 12, 2017, that had cost $12,000 when purchased on June 6, 2012; it had an adjusted basis of $4,000 when sold. The gains or

losses on these asset sales are the same for tax and financial accounting. The business complies with all Form 1099 requirements.

Information specific to the corporate form:

The S Corporation made estimated payments for its own State of North Carolina taxes of $10,000 and withheld $45,000 from William’s salary for income taxes. For financial accounting, the corporation does not expense the new display case but deducts $1,000 of depreciation expense. It has a beginning balance of $200,000 in its retained earnings account and made a $25,000 distribution to its shareholders on December 31, 2017.

The corporation’s beginning and ending accrual-basis balance sheets for 2017 are shown below:

                               Jan. 1, 2017                           Dec. 31, 2017

Assets:

Cash                            $62,000                                $ 224,753

Acc Rec                         37,500                                    332638

Inventory                     340,000                                   340,000

Tax Refund                                                                    5,462

Plant, Prop&Equip      $80,000                                 $68,000

Less: Acc Deprec.         62,000                                  59,000   

                                        18,000                                     9,000

Total Assets                $457,500                              $911,853

Liabilities and Equities:

Accounts Payable         $20,000                                          0

Deferred Tax Liability              0                                     $600

Note Payable                    12,500                                 12,500

Common Stock               225,000                              225,000

Retained Earnings          200,000                              673753

Total Liab.&Equities     $457,500                            $911,853

Note that any unaccounted for differences between Financial Statement Income and Taxable Income should be considered timing differences from depreciation methods for Schedule M.

you'll nedd to file the tax for s corporatioin.

Please download the necessary forms.

1120s, form K-1, form 941 and form 940

THIS FORMS AREAVILABLE ONLINE FOR DOWNLOAD.

This problem is bit complex ,PEOPLE WERE NOT ABELE TO COMPLETE IT.

YOUR HELP WOULD BE GREATLY APPRECIATED.

Solutions

Expert Solution

Gross Receipt      3,700,000.00
Add: Profit on sale of Assest                         -  
   3,700,000.00
Less: Merchandise Purchase    2,480,000.00
Advertising          40,000.00
Cleaning/Maintenance          12,000.00
Dep.              5,000.00
Sec. 179 Exp.            5,000.00
Salary to William        200,000.00
Insurance          18,000.00
Intt. Exp.            1,000.00
License/ fee            4,000.00
Meals/entertainment          10,000.00
Office exp.          14,000.00
Rent        120,000.00
Salary/Wages        210,000.00
Travel            8,000.00
Utilities          32,000.00
Health Insurance          12,000.00
Charitable              2,000.00
FICA            10,247.00
Payroll Tax          18,000.00
Loss on sale of Asset                         -  
Profit Transfer to Retained Earning        498,753.00
Add: Opening Bal. of Retained Earning        200,000.00
       698,753.00
Less: Distributed to Shareholders          25,000.00
Closing Balance          673,753.00

Gross Receipt      3,700,000.00
Add: Profit on sale of Assest                         -  
   3,700,000.00
Less: Merchandise Purchase    2,480,000.00
Advertising          40,000.00
Cleaning/Maintenance          12,000.00
Dep.              5,000.00
Sec. 179 Exp.            5,000.00
Salary to William        200,000.00
Insurance          18,000.00
Intt. Exp.            1,000.00
License/ fee            4,000.00
Meals/entertainment          10,000.00
Office exp.          14,000.00
Rent        120,000.00
Salary/Wages        210,000.00
Travel            8,000.00
Utilities          32,000.00
Health Insurance          12,000.00
Charitable              2,000.00
FICA            10,247.00
Payroll Tax          18,000.00
Loss on sale of Asset                         -  
Profit Transfer to Retained Earning        498,753.00
Add: Opening Bal. of Retained Earning        200,000.00
       698,753.00
Less: Distributed to Shareholders          25,000.00
Closing Balance          673,753.00

Gross Receipt      3,700,000.00
Add: Profit on sale of Assest                         -  
   3,700,000.00
Less: Merchandise Purchase    2,480,000.00
Advertising          40,000.00
Cleaning/Maintenance          12,000.00
Dep.              5,000.00
Sec. 179 Exp.            5,000.00
Salary to William        200,000.00
Insurance          18,000.00
Intt. Exp.            1,000.00
License/ fee            4,000.00
Meals/entertainment          10,000.00
Office exp.          14,000.00
Rent        120,000.00
Salary/Wages        210,000.00
Travel            8,000.00
Utilities          32,000.00
Health Insurance          12,000.00
Charitable              2,000.00
FICA            10,247.00
Payroll Tax          18,000.00
Loss on sale of Asset                         -  
Profit Transfer to Retained Earning        498,753.00
Add: Opening Bal. of Retained Earning        200,000.00
       698,753.00
Less: Distributed to Shareholders          25,000.00
Closing Balance          673,753.00

ekkarill92 answered 2 years ago
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