INCOME TAX PROJECT
This Income Tax Project comes with three (3) options. You may complete either of the three (3) options you choose.
OPTION 1
Option 1 is a C (Regular) Corporation Tax Return.
OPTION 2
Option 2 is a Partnership Tax (Information) Return.
OPTION 3
Option 3 is an S Corporation Tax Return.
The Income Tax Return may be prepared manually or using the PROSERIES (TURBOTAX) software (or some other Federal Income Tax (or Information) software that you may have access to) that is located on the Network System in the Computer Center on the Eight floor (South) at the University Of Houston-Downtown Campus (and the second floor classrooms in the Shea Street College Of Business Building) (or on the personal computers at UHD-Northwest at Lone Star College-University Park). If you choose to prepare the Income Tax (or Information) Return using the ProSeries (TurboTax) software in the Computer Center (or at UHD-Northwest at Lone Star College-University Park), the following information applies. The ProSeries (TurboTax) software may be accessed from any personal computer in the Computer Center that is connected to the Network System at the University Of Houston-Downtown Campus (or on the personal computers on the personal computers at UHD-Northwest at Lone Star College-University Park). Please bring a device to the Computer Center in order to save your data. (Please be sure that the device is capable of saving your data). To assist you in using the ProSeries (TurboTax) software, an operator's manual is available in the Computer Center (or at UHD-Northwest at Lone Star College-University Park). Below is a listing of basic instructions in operating the software.
INSTRUCTIONS
Click on START and enter "PROGRAMS" and locate "ProSeries 2016". Click on "2016 ProSeries". The software will appear on the screen.
CREATING CLIENT/INPUTTING DATA
Click on "New" to create a new client. You will select the type of Income Tax Return. Choose the Income Tax Return for which of the three (3) options that you choose to prepare an Income Tax Return. After selecting a type of Income Tax Return, the first document that you will enter (automatically appears on the screen) will be the "Information Worksheet" (preceded by the name of type of Return chosen, ie. Partnership, etc.). Complete all necessary information on the "Information Worksheet". To enter specific tax related information, you must enter the form, schedule or document that relate to the tax related information you wish to enter. Much of the information will be entered on the forms labeled page 1-2. To go to a specific Form or document, you may either click on "Forms" (and then click on "Select Form"), hit the "F6" key or hit "Control F" then highlight the desired Form, Schedule or document (or press the lighted letter(s) and/or number(s) of the desired Form, Schedule or document) and press return (enter).
WORKSHEETS
In many cases, information may (or must) be entered into a worksheet which is automatically transferred to where needed in the respective Income Tax Returns. This is especially true for Form 1065 (Partnership Return) for entering information on partners, etc. Accordingly, pay attention to the many worksheets that are available for the Return you are preparing to see if certain information may (or must) be entered through a worksheet instead of directly in the Forms and/or Schedules of the Income Tax Return itself.
DEPRECIATION
To enter depreciation information, either click on "Forms" (and then click on "Select Form"), hit the "F6" key or hit "Control F" and enter the "Depr Entry Wks". Enter a description of the asset to be depreciated and press return (enter). Highlight the Form or Schedule the asset relates to (for Partnerships and S Corporations) and press return (enter). Complete the necessary information at the top of the "Asset Entry Worksheet". The computed depreciation will automatically be transferred to the appropriate Form or Schedule that the asset relates. (If the Form or Schedule that the asset relates has not been previously created (for Partnerships and S Corporations), you will be asked to create the Form or Schedule at this time).
PRINTING
To access the print commands, press "Control P" and click on "Tax Returns" then press return (enter) to print the entire Tax Return. If you desire to print one (1) Form or Schedule at a time, click on the printer on the tool bar with the red arrow, then click on "Choose" and select the desired Form or Schedule to print.INCOME TAX PROJECT
OPTION 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 2016, 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 **
* - 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 - 2015 Lexus 460 April 1, 2015 $ 50,000
(Five-year Property)
Automobile - 2015 Cadillac Seville April 1, 2015 50,000
(Five-year Property)
Furniture And Fixtures May 1, 2014 150,000
(Seven-year Property)
Each automobile was used a total of 18,000 miles during the year of 2016 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 2016 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.
ESTIMATED TAX PAYMENTS
During 2016, Lawson And Norman Enterprises, Inc. made the following estimated tax payments:
April 15, 2016 $30,000
June 15, 2016 $20,000
September 15, 2016 $20,000
December 15, 2016 $10,000
The 2015 Federal Income Tax liability for Lawson And Norman Enterprises, Inc. was $76,800 and no overpayment of 2015 Federal Income Tax is being applied to the 2016 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 2016, 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 2016, 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 2016. The following Forms are needed to complete the Tax Return:
Form 1120
Form 1125-A
Form 1125-E
Schedule G (Form 1120)
Form 4562
Form 4626
The Income Tax Return is due on MAY 6, 2017. (PLEASE REMEMBER TO PUT YOUR NAME ON THE PROJECT).INCOME TAX PROJECT
OPTION 2
FACTS
Valerie Lawson and Clara Norman are the sole equal partners in the general partnership of Lawson And Norman Enterprises. The partnership, which is a retail office supplies and stationery store, began its operations on January 2, 1985. For Federal Income Tax purposes, the partnership 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) 536-1908 and E-Mail address is "lawsonandnormanenterprises.com". The business activity code for the partnership is 453210. Both partners devote one hundred percent (100%) of their time to the business of the partnership and are equal partners of the partnership in every respect (ie. profit sharing ratio, loss sharing ratio, ownership, etc.). Valerie Lawson, who is the designated Tax Matters Partner for the partnership, has social security number of 234-56-7890, her address is 8124 Annette Court Houston, Texas 77031-9475 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 2016, the Lawson And Norman Enterprises 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
Guaranteed Payments: Valerie Lawson 75,000
(Services) Clara Norman 75,000
Salaries - 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
Partners' Life Insurance Premiums 14,400 **
* - 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 Is The Designated Beneficiary.
On January 1, 2016, the partner's Capital Accounts equaled $157,200 each. No additional capital contributions were made during the year of 2016 and each partner made a total of $140,000 (all cash) withdrawals throughout the course of the year of 2016.
The Lawson And Norman Enterprises owns the following depreciable assets:
ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST
Automobile - 2015 Lexus 460 April 1, 2015 $ 50,000
(Five-year Property)
Automobile - 2015 Cadillac Seville April 1, 2015 50,000
(Five-year Property)
Furniture And Fixtures May 1, 2014 150,000
(Seven-year Property)
Each automobile was used a total of 18,000 miles during the year of 2016 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 at the beginning and ending of the year of 2016 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 PARTNERS' CAPITAL
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
Partner's Capital (Total) 314,400 328,800
TOTAL LIABILITIES AND ------------ ------------
PARTNERS' CAPITAL $ 599,000 $ 681,000
======= =======
OTHER INFORMATION
Both partners are United States citizens (and individuals) and the partnership is not a partner in any other partnership. The partnership is not subject to the consolidated audit procedures of Sections 6221 through 6233 of the Internal Revenue Code and the partnership does not meet all three (3) requirements shown in the instructions (Schedule B) for Question 5. In addition, the partnership is not a publicly traded partnership as defined in Section 469(k)(2) of the Internal Revenue Code and the partnership has not filed nor is required to file Form 8264 - Application For Registration Of A Tax Shelter. During the year of 2016, Lawson And Norman Enterprises had no interest in or signature or other authority over any financial account in a foreign country. Furthermore, during the year of 2016, the partnership did not receive a distribution from nor was the partnership a grantor of, or transferor to, a foreign trust. Finally, there were no distributions of property or transfer of a partnership interest during the year of 2016.
REQUIRED
Prepare the Partnership Return for the Lawson And Norman Enterprises for the year of 2016 and Schedule K-1 for both partners. The following Forms are needed to complete the Return:
Form 1065
Schedule B-1 (Form 1065)
Form 1125-A
Schedule K-1 (Form 1065) (2)
Form 4562
OPTION 3
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, Texas 77031-9475 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 2016, 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 **
* - 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 2016 and each shareholder made a total of $140,000 (all cash) withdrawals throughout the course of the year of 2016.
The Lawson And Norman Enterprises, Inc. owns the following depreciable assets:
ASSET DESCRIPTION DATE ACQUIRED ORIGINAL COST
Automobile - 2015 Lexus 460 April 1, 2015 $ 50,000
(Five-year Property)
Automobile - 2015 Cadillac Seville April 1, 2015 50,000
(Five-year Property)
Furniture And Fixtures May 1, 2014 150,000
(Seven-year Property)
Each automobile was used a total of 18,000 miles during the year of 2016 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 2016 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 2016, 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 2016. 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 2016 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 2016 and Schedule K-1 for both shareholders.
The following Forms are needed to complete the Tax Return:
Form 1120S
Form 1125-A
Form 1125-E
Schedule K-1 (Form 1120S) (2)
Form 4562