ACC - CCS Corporate Tax Return Problem - Rachael Ray, Paula Deen and Gordon Ramsay
Question # 00017123
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Updated on: 06/08/2014 01:51 AM Due on: 06/08/2014
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
Repairs and Maintenance 6,000
2 | Page
Property Taxes 13,000
State Income Tax 43,000
Other Taxes 44,000
Rent 30,000
Interest 5,000
Advertising 52,000
Professional Services 16,000
Supplies 5,000
Depreciation 10,000
Employee benefits Programs 32,000
Other Expenses 12,000
Total expenses 1.281,000
Net income before taxes $184,000
Federal income taxes [62,000]
Net income after taxes $122,000
Notes:
1. CCS’S inventory-related purchases during 2012 were $360,000. It values its i
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
Repairs and Maintenance 6,000
2 | Page
Property Taxes 13,000
State Income Tax 43,000
Other Taxes 44,000
Rent 30,000
Interest 5,000
Advertising 52,000
Professional Services 16,000
Supplies 5,000
Depreciation 10,000
Employee benefits Programs 32,000
Other Expenses 12,000
Total expenses 1.281,000
Net income before taxes $184,000
Federal income taxes [62,000]
Net income after taxes $122,000
Notes:
1. CCS’S inventory-related purchases during 2012 were $360,000. It values its i
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Solution: ACC - CCS Corporate Tax Return Problem - Rachael Ray, Paula Deen and Gordon Ramsay Solution