Your name is Wesley Tie. You are a partner in the CPA firm of Bosch & Tie, LLP. Your Preparer tax identification number is P00555444.
Your Firm
Bosch and Tie, LLP's address is: 7000 Aptos Drive - Rio Del Mar, CA 95003 and its phone number is (831) 555-5555. Bosch & Tie, LLP's EIN is: 99-99,99,999.
Client
Your client is Sydney Kasey Sports Incorporated. Its address is: 101 Pace Drive - Rio Del Mar, CA 95003. It is in the business of selling sporting goods at the retail level.
Its Employer Identification Number is 94-1234567. It was incorporated in California on 1/1/2014.
The corporate officer authorized to sign its tax returns is Kasey Hanako. Her social security number is 555-55-5555 and she is a citizen of the United States. She is the President and only officer of the corporation. She owns 50% of the shares of the corporation. She spent 2,700 hours working for the corporation in 2014. She was paid $20,000 of wages in 2014. Her personal address is: 202 Main Street - Freedom, CA 95019
The only other shareholder is Sydney Hanako. Her social security number is 444-44-4444 and she is a citizen of the United States. She spent no hours working for the corporation in 2014. She was not paid any wages in 2014. Her personal address is: 303 Main Street - Watsonville, CA 95076
It uses the cash basis of accounting for accounting and tax return purposes. In addition, it uses a calendar year both for both financial accounting and tax purposes.
Sydney Kasey Sports Incorporated's 2014 Cash Basis Profit and Loss
Statement is as follows:
2014 Income Statement
Revenues
Gross sales of $193,550
Cost of Goods Sold
Inventory as of 1/1/14: None
Inventory purchased during 2014 of $70,000
Inventory as of 12/31/14 of $25,340
[Note: All inventory figures are valued based on original cost and using the specific identification method (i.e., neither FIFO nor LIFO); IRC Sect. 263A (UNICAP) does not apply to the corporation; there were not any changes in the method of valuing inventories; and there were no writedowns of subnormal goods in 2014.]
Other Expenses
Store rent: $12,000
Advertising services: $ 5,000
Wages: $20,000 {See note on Page 1}
Payroll Taxes: $ 1,730
Sydney Kasey Sports Incorporated's 2014 Year End Balance Sheet is as follows:
12/31/2014 Year-End Balance Sheet
Cash: $84,320
Inventory: $25,340
Equity: $109,660
- For purposes of this return, there were no items on the balance sheet as of 1/1/2014
Detailed Task
1) Using only the blank forms available on www.IRS.gov, prepare and properly attach to2ether, Sydney Kasey Sports Incorporated's Federal income tax return for the 2014 Tax Year - but you only need to include these forms/schedules:
- Form 1120 (Main Form)
- Form 1125A (if applicable)
- Schedule G (if applicable)
- Form 1125-E (if applicable)
2) Prepare all paid preparer and taxpayer signature sections of the return as sign / date in both sections.
3) You do not need to prepare the corporation's California tax return.
4) You do not need to compute any late payment penalties and/or interest.
5) Use the actual date you turn in the tax return to the professor in the date sections of both the paid preparer and taxpayer signature portions of the tax return.
6) Also prepare (as it would have been prepared earlier in 2015) the appropriate Federal extension form for the 1120 and include this along with the tax return.
7) IMPORTANT: In addition to the corporate-income tax return, prepare and include with your income tax return submission (attached to the back of the income tax return) any applicable 1099-series forms that must be issued for the year. You do not need to prepare a Form 1096.
Other Important Items:
1) The landlord for the store that Sydney Kasey Sports Incorporated rents is an individual - John Smith. His tax ID is: 777-77-777 and address is: 101 Main. Street - Freedom, CA 95019
2) The advertising company that Sydney Kasey Sports Incorporated uses is Kristi and Son's Watsonville Space Age Advertising. It is a general partnership. Its address is: 101 Main Street - Watsonville, CA 95076 and its Tax ID is: 94-7654321
3) Sydney Kasey Sports Incorporated is not a subsidiary in an affiliated group or a parent-subsidiary group. In addition, it does not own any shares in any other corporation.
4) All 2 shareholders remained the same throughout the year and their ownership interests never changed.
5) The corporation does not own any real estate and its lease for its store is for a period of 10 years.
6) For Schedule K of Form 1120, you are given that the answers to question nos. 6, 7, 14, 17, and 18 are "no" and the checkbox to no. 8 is to be unchecked.
7) $500 of cash distributions were made in 2014: $250 to Kasey and $250 to Sydney. All cash distributions were paid on 12/1/2014.
8) Your client has asked you to file the return with the least amount of required schedules filled-out on the 1120 form as possible.
9) Your client allows you to discuss its tax return with the IRS.