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Corporation Income Tax Return Assignment

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Added on: 2023-02-22 12:53:10
Order Code: eqb1 22-2-23
Question Task Id: 0
  • Country :

    Australia

Instructions:

Please complete Express Catering, Inc.’s 2022 Form 1120, U.S. Corporation Income Tax Return, based upon the information provided below. If required information is missing, use reasonable assumptions to fill in the gaps.

Express Catering, Inc. (EC) is organized in the state of New York as a corporation and is taxed as a “C” corporation with a calendar year-end. EC operates a delicatessen/bakery in New York City, NY that specializes in mobile food catering for events and gatherings within the tri-state area. EC’s address (unchanged since inception), employer identification number (EIN), and date of incorporation are as follows:

Express Catering, Inc.

257 West 55th Avenue

New York City, NY 10027

EIN: 13-9823459

Date of Incorporation: March 17, 2014

EC’s address has not changed since its inception.

EC has been rapidly expanding its catering business. This expansion has required a significant amount of new equipment purchases. EC sold some of its liquid investments in order to avoid having to take on debt to fund these purchases. Further, EC invested heavily in its catering business by significantly increasing its advertising budget. EC and its officers expect that revenue increases from these expenditures will begin next year.

EC is owned by four related shareholders from the same family for the entire year: Raphael Giordano (father) and his three children Silvia, Andrea, and Marco. None of EC’s shareholders are non-U.S. persons. There are currently 10,000 shares of EC common stock issued and outstanding (EC has never issued preferred stock).

The shareholders are also employees of EC and its only corporate officers. The relevant shareholder and officer information for the current year is provided below. Officer compensation is included in Employee Salaries on the income statement. Their personal information is provided below:

Raphael Giordano

160 West 57th Avenue

New York City, NY 10027

SSN: 356-87-4322

Shares owned 5,500

100% of time devoted to the business, compensation of $150,000

Silvia Giordano Costa

250 South Main

Hoboken, New Jersey 07030

SSN: 284-58-4583

Shares owned 1,500

100% of time devoted to the business, compensation of $130,000

Andrea Giordano

65 East 55th Avenue

New York City, NY 10027

SSN: 423-84-2343

Shares owned 1,500

100% of time devoted to the business, compensation of $130,000

Marco Giordano

160 West 57th Avenue

New York City, NY 10027

SSN-487-27-4797

Shares owned 1,500

100% of time devoted to the business, compensation of $120,000

EC follows the accrual method of accounting (GAAP) and is not a member of any consolidated or affiliated group of entities. EC is not audited by a CPA firm and has never had to restate its financial statement information.

Supplementary Details:

  • The dividends received by EC during the year were paid by Apple, Inc. (EC owns less than 20% of Apple, Inc.’s stock).
  • EC had its sole municipal bond (New York City) redeemed (bought back) in the current year. EC originally purchased the New York City bonds on February 1, 2017 for $100,000 (no premium or discount paid). The bond was redeemed by New York City on February 1, 2022 for $100,000. Both tax basis and proceeds received on this transaction were reported to EC on a Form 1099-B.
  • EC purchased 200 shares of Apple, Inc. on October 10, 2017 for $100,000 (including commission). On July 10, of the current year, EC sold the 200 shares of Apple, Inc. for $350 a share (including commission). Both tax basis and proceeds received on this transaction were reported to EC on a form 1099-B.
  • During the year, EC contributed $8,000 to the American Lung Association.
  • On December 10, EC paid Madison Advertising $27,500 to design a new catering advertisement campaign for next year. This money represented half of the total $55,000 contract price. EC expects that the services will be provided and delivered to EC on about June 30, 2022.
  • EC prepaid an insurance premium of $21,000 in September. The new policy is effective October 1, 2022 through September 30, 2023.
  • EC’s regular tax depreciation for the year is correctly calculated as $350,000 before considering the current year fixed asset additions of $840,000 (see table below). EC wants to claim the fastest recovery method(s) possible on these asset additions without electing any §179 expensing.
  • EC acquired the following new fixed assets from unrelated parties in 2022:

  • EC reports employee compensation amounts that remained unpaid at year-end in Accrued Bonuses, Accrued Vacation and Accrued Wages on the balance sheet, as applicable. The table below provides a summary of the balances in these accounts for December 31, 2020 and 2021.

Supplementary Details (continued):

  • On November 1, a large insurance company paid EC a $100,000 deposit to reserve catering event services on March 18, 2022 at the insurance company’s annual meeting in New York City. The deposit is fully refundable until January 15, 2022. Thereafter, half of the deposit becomes non-refundable.
  • Meal expenses were incurred for clients and EC staff at important meetings where business was conducted. EC did not incur any entertainment-related expenses in 2021.
  • EC values its inventory at cost and has always used the specific identification method for reporting purposes. The company has never written down any inventory for any reason and the rules of Section 263A (UNICAP) do not apply to EC.
  • EC made the following estimated Federal income tax payments:
    • April 15 th , 2021: $2,000
    • September 15 th , 2021: $2,000
    • June 15 th , 2021: $2,000
    • December 15 th , 2021: $1,000
  • If applicable, EC wants any overpayment refunded.

Miscellaneous Information:

  • EC did not make any dividend distributions or distributions in excess of current and accumulated earnings and profits during the current year.
  • EC does not have any net operating loss carryforward amounts available for the current year.
  • EC has never issued publicly offered debt instruments.
  • EC is not required to file a Schedule UTP, Uncertain Tax Position Statement.
  • EC made several payments during the current year that were required to be reported on Forms 1099-NEC; all required Forms 1099 were filed timely by EC.
  • EC has never disposed of more than 65% (by value) of its assets in a taxable, non-taxable, or tax-deferred transaction.
  • EC did not receive any assets in Section 351 transfers during the year.
  • EC’s average annual gross receipts have never exceeded $26 million annually.

Express Catering, Inc.

Financial Statements (kept on a GAAP basis):

Income Statement for the period ending December 31, 2022

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  • Posted on : February 22nd, 2023
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