29 Jun ion CCS Corporate Tax Return Problem
Question
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 is 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: o Rachael is the chief executive officer and president, (SS# 231-54-8976). Her salary this year is $200,000. o Paula is the executive VP and Chief operating officer (SS#798-56-3241). Her salary this year is $140,000. o Gordon is the VP of Finance (SS# 879-21-4536). His salary this year is $130,000.
• 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 $20,000 each. Its tax liability last year was $70,000. If it has overpaid its federal tax liability, CCS would like to receive a refund.
• CCS paid a dividend of $30,000 to its shareholders on November 1. CCS had ample earnings and profits (E&P) to absorb the distribution.
The following is CCS’s income statement for 2012:
Income Statement Income Sales $1,800,000
Sales returns and allowances (5,000)
Net sales 1,795,000
Cost of goods sold 350,000
Gross profit 1,445,000
Capital loss ($15,000)
Dividend income 25,000
Interest income 10,000
Total income $1,465,000
Expenses Salaries-officers $470,000
Salaries and wages – other 525,000
Bad Debt 15,000
Meals & Entertainment 3,000
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