Reference no: EM131381805

CCS Corporate Tax Return Problem

Rachael Ray, Paula Deen and Gordon Ramsay each own one-third of the common stock of Celebrity Catering Services, Inc. (CCS). CCS was incorporated on February 2, 2009. It has only one class of stock outstanding and operates as a C corporation for tax purposes. CCS caters to all types of social events.

CCS is located at 540 Waverly Way Burbank, CA 91501

Its employer ID is 38-4743474

CCS's business activity is catering food services. Its business activity code is 722300.

The shareholders also work as officers for the corporation as follows:

• Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $180,000.
• Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $120,000.
• Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $150,000.

All officers devote 100% of their time to the business and all of the officers are US citizens.

CCS uses the accrual method of accounting and has a calendar year-end.

CCS made four equal quarterly estimated tax payments of $36,500 each. Its tax liability last year was $125,800. If it has overpaid its federal tax liability, CCS would like to receive a refund.

In the prior year, the company made a large charitable contribution. $43,000 of that contribution exceeded the amount deductible and was carried forward to the current year.

CCS paid a dividend of $30,000 to each of its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution.

Income Statement

Income
Sales		$2,600,000
Sales returns and allowances		(5,000)
Net sales		2,595,000
Cost of goods sold		450,0001
Gross profit		2,145,000
Capital loss		($17,000)
Dividend income		25,0002
Interest income		8,0003
Total income		$2,161,000
Expenses
Salaries-officers	$450,000
Salaries and wages - other	625,000
Bad Debt	15,000
Meals & Entertainment	28,000
Repairs and Maintenance	6,000
Property Taxes	13,000
State Income Tax	23,000
Payroll Taxes	107,500
Charitable Contribution	15,500
Equipment Rent	20,000
Warehouse Rent	220,000
Interest	5,0004
Advertising	62,000
Professional Services	15,000
Depreciation	10,0005
Employee benefits Programs	53,040
Other Miscellaneous Expenses	15,2006
Total expenses		1.683,240
Net income before taxes		$477,760
Federal income taxes		[161,180]
Net income after taxes		$316,580

Balance Sheet

Assets	1/1/2016	12/31/16
Cash	$180,000	$251,760
Trade and accounts receivables	560,000	570,000
Allowance for Doubtful Accounts	(60,000)	(54,000)7
Inventories	140,000	150,000
U.S. government bonds	20,000	20,000
State & Local bonds	120,000	120,000
Investment In Stock	400,000	353,0008
Prepaid Federal Income Taxes	0	1,686
Property, plant and equipment	140,000	160,000
Accumulated depreciation	(50,000)	(60,000)
Other assets	20.000	45,000
Total Assets	$1,470,000	$1,557,446
Liabilities and Owners' Equity
Accounts payable	$280,000	$130,000
Income Taxes Payable	5,000	0
Deferred Tax Liability	10,000	26,866
Other current liabilities	5,000	21,000
Other Liabilities	40,000	23,000
Capital stock	400,000	400,000
Retained earnings	730,000	956,580
Total Liabilities and Owners' Equity	$1,470,000	1,557,446

Required:

Complete Celebrity Catering Service Inc.'s (CCS) Form 1120 and all related schedules. Be sure to attach schedules for any line item which indicates one is required on the 1120.

FORM 4562 is not required. (Do not complete Form 4562 [depreciation calculation] since you do not have all the information).

If any information is missing, use reasonable assumptions to fill in the gaps and list those assumptions as an attachment.

The forms schedules and instructions can be found at www.irs.gov and download the necessary forms.