Description
Assignments
Unit 5 - Individual Project
Due Date: May 10, 2017 Max Points: 250
Details:
Key Assignment
The owners of The Car Wash have asked you to prepare their tax return. Their financial statements are audited by a local certified public accounting (CPA) firm, and they have provided them to you as a reference. A copy of the Income Statement and Balance Sheet have been reproduced below. In your discussion, you obtained the following pieces of additional information to prepare the tax return:
- Name of business owner: Tim Smith, SSN:123-45-6789
- Tim Smith’s address: 8765 Warner Street, Huntington Beach, CA 92605
- Name of business owner: Jack Dillard, SSN: 987-65-4321
- Jack Dillard’s address: 4321 Courtyard Place, Huntington Beach, CA 92605
- Business name: The Car Wash
- Business address: 1046 Broadway Street, Huntington Beach, CA 92605
- Business description: Self-Service Car Wash
- Employer identification number: 99-8877665
- Date the business started: January 1, 2008
- Business will file its return using the cash basis of accounting
December 31, 20XX
Revenue: |
Service revenue
$254,603
Expenses:
Advertising
2,520
Depreciation
31,250
Insurance
7,260
Interest expense
36,204
Licenses and fees
7,260
Miscellaneous
4,074
Office expense
8,911
Salaries and wages
67,460
Payroll taxes
9,444
Employee benefits
1,349
Professional fees
1,210
Repairs and maintenance
20,674
Telephone
900
Travel
1,500
Utilities
27,752
Net income before taxes
$26,835
Balance Sheet
January 1, 20XX
December 31, 20XX
Assets
Cash
$28,638
$64,979
Buildings and other depreciable assets
555,000
555,000
Accumulated depreciation
(62,500)
(93,750)
Total assets
521,138
526,229
Liabilities and equity
Loans
183,757
167,962
Mortgage
233,229
227,280
Equity investment
160,000
160,000
Retained earnings
(55,848)
(29,013)
Total liabilities and equity
$521,138
$526,229
Part 1
Fill out form K-1 as Car Wash S corporation and car wash LLC.
Part IIDeliverable Length: 800–1,100 words
Your client has been informed that an S corporation is a popular business form and wants to know more about it. Please write a professional memo to your client responding to his inquiry. Be sure to at least discuss the following items:
- What is an S corporation?
- When is it advisable to be taxed as an S corporation?
- How does an organization become an S corporation?
- If The Car Wash is a corporation, can they be taxed as an S corporation?
- Why or why not?
- What criteria must be met?
- If The Car Wash is a LLC, can it be taxed as an S corporation?
- If so, what does it need to do to elect S corporation status?
- How would The Car Wash report and pay tax if it is an S corporation?
For assistance with your assignment, please use your text, Web resources, and all course materials.
Explanation & Answer
Attached.
Certain Cash Contributions for Typhoon Haiyan Relief Efforts
in the Philippines Can Be Deducted on Your 2013 Tax Return
A new law allows you to choose to deduct certain charitable contributions
of money on your 2013 tax return instead of your 2014 return. The
contributions must have been made after March 25, 2014, and before April
15, 2014, for the relief of victims in the Republic of the Philippines affected
by the November 8, 2013, typhoon. Contributions of money include
contributions made by cash, check, money order, credit card, charge card,
debit card, or via cell phone.
The new law was enacted after the 2013 forms, instructions, and
publications had already been printed. When preparing your 2013 tax
return, you may complete the forms as if these contributions were made on
December 31, 2013, instead of in 2014.
The contribution must be made to a qualified organization and meet all
other requirements for charitable contribution deductions. However, if you
made the contribution by phone or text message, a telephone bill showing
the name of the donee organization, the date of the contribution, and the
amount of the contribution will satisfy the recordkeeping requirement.
Therefore, for example, if you made a $10 charitable contribution by text
message that was charged to your telephone or wireless account, a bill
from your telecommunications company containing this information
satisfies the recordkeeping requirement.
1065
Form
Department of the Treasury
Internal Revenue Service
A Principal business activity
U.S. Return of Partnership Income
OMB No. 1545-0099
2013
, 2013, ending Dec 31 , 20
Jan 1
13
.
▶ Information about Form 1065 and its separate instructions is at www.irs.gov/form1065.
For calendar year 2013, or tax year beginning
D Employer identification number
Name of partnership
The Car Wash
Cash Wash
B Principal product or service
Self-Service Car Wash
C Business code number
Type
or
Print
99-8877665
E Date business started
Number, street, and room or suite no. If a P.O. box, see the instructions.
1046 Broadway Street
January 1, 2008
City or town, state or province, country, and ZIP or foreign postal code
F Total assets (see the
instructions)
Huntington Beach, CA 92605
G
H
I
J
(1)
(2)
(3)
Initial return
Final return
Name change (4)
Address change
(6)
Technical termination - also check (1) or (2)
Other (specify) ▶
Check accounting method: (1) ✔ Cash
(2)
Accrual
(3)
Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ 2
(5)
Check applicable boxes:
Check if Schedules C and M-3 are attached
.
.
.
.
526229
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
00
Amended return
.
.
.
.
.
Deductions
(see the instructions for limitations)
Income
Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information.
1a
b
c
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16a
b
17
18
19
20
21
22
Signature of general partner or limited liability company member manager
Print/Type preparer’s name
Firm’s name
Preparer’s signature
▲
Paid
Preparer
Use Only
00
00
1c
2
3
4
5
6
7
8
9
10
11
12
13
14
15
254603
0
254603
0
0
0
0
00
00 16c
17
18
19
20
21
22
00
00
00
00
00
00
00
254603
7460
00
00
60000
20674
0
00
00
00
0
16704
36204
00
00
00
47453
0
00
00
0
1349
54127
00
00
00
243971
10632
00
00
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my
knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than general partner or limited liability company member manager)
is based on all information of which preparer has any knowledge.
▲
Sign
Here
1a
Gross receipts or sales . . . . . . . . . . . . .
254603
Returns and allowances . . . . . . . . . . . .
1b
0
Balance. Subtract line 1b from line 1a . . . . . . . . . . . . . . . . . .
Cost of goods sold (attach Form 1125-A) . . . . . . . . . . . . . . . .
Gross profit. Subtract line 2 from line 1c . . . . . . . . . . . . . . . . .
Ordinary income (loss) from other partnerships, estates, and trusts (attach statement) . .
Net farm profit (loss) (attach Schedule F (Form 1040)) . . . . . . . . . . . .
Net gain (loss) from Form 4797, Part II, line 17 (attach Form 4797) . . . . . . . .
Other income (loss) (attach statement) . . . . . . . . . . . . . . . . .
Total income (loss). Combine lines 3 through 7 . . . . . . . . . . . . . .
Salaries and wages (other than to partners) (less employment credits) . . . . . . .
Guaranteed payments to partners . . . . . . . . . . . . . . . . . . .
Repairs and maintenance . . . . . . . . . . . . . . . . . . . . . .
Bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation (if required, attach Form 4562) . . . . . .
16a
47453
Less depreciation reported on Form 1125-A and elsewhere on return 16b
0
Depletion (Do not deduct oil and gas depletion.) . . . . . . . . . . . . .
Retirement plans, etc. . . . . . . . . . . . . . . . . . . . . . . .
Employee benefit programs . . . . . . . . . . . . . . . . . . . . .
Other deductions (attach statement) . . . . . . . . . . . . . . . . . .
Total deductions. Add the amounts shown in the far right column for lines 9 through 20 .
Ordinary business income (loss). Subtract line 21 from line 8 . . . . . . . . .
May the IRS discuss this return with the
preparer shown below (see
instructions)?
Yes
No
Date
Date
PTIN
Firm's EIN ▶
▶
Firm’s address ▶
For Paperwork Reduction Act Notice, see separate instructions.
Check
if
self-employed
Phone no.
Cat. No. 11390Z
Form 1065 (2013)
Form 1065 (2013)
Schedule B
1
a
c
e
2
3
Page
What type of entity is filing this return? Check the applicable box:
Domestic general partnership
b
Domestic limited partnership
✔ Domestic limited liability company
d
Domestic limited liability partnership
Foreign partnership
f
Other ▶
At any time during the tax year, was any partner in the partnership a disregarded entity, a partnership (including
an entity treated as a partnership), a trust, an S corporation, an estate (other than an estate of a deceased partner),
or a nominee or similar person? . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yes
No
✔
At the end of the tax year:
Did any foreign or domestic corporation, partnership (including any entity treated as a partnership), trust, or taxexempt organization, or any foreign government own, directly or indirectly, an interest of 50% or more in the profit,
loss, or capital of the partnership? For rules of constructive ownership, see instructions. If “Yes,” attach Schedule
B-1, Information on Partners Owning 50% or More of the Partnership . . . . . . . . . . . . . . .
✔
b Did any individual or estate own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital of
the partnership? For rules of constructive ownership, see instructions. If “Yes,” attach Schedule B-1, Information
on Partners Owning 50% or More of the Partnership
. . . . . . . . . . . . . . . . . . . .
✔
a
4
a
At the end of the tax year, did the partnership:
Own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of
stock entitled to vote of any foreign or domestic corporation? For rules of constructive ownership, see
instructions. If “Yes,” complete (i) through (iv) below . . . . . . . . . . . . . . . . . . . . .
(i) Name of Corporation
(ii) Employer Identification
Number (if any)
(iii) Country of
Incorporation
✔
(iv) Percentage
Owned in Voting Stock
b Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss,
or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial
interest of a trust? For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v) below . .
(i) Name of Entity
(ii) Employer
Identification
Number (if any)
(iii) Type of
Entity
(iv) Country of
Organization
✔
(v) Maximum
Percentage Owned in
Profit, Loss, or Capital
Yes
5
2
Other Information
Did the partnership file Form 8893, Election of Partnership Level Tax Treatment, or an election statement under
section 6231(a)(1)(B)(ii) for partnership-level tax treatment, that is in effect for this tax year? See Form 8893 for
more details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No
✔
6
Does the partnership satisfy all four of the following conditions?
a The partnership’s total receipts for the tax year were less than $250,000.
b The partnership’s total assets at the end of the tax year were less than $1 million.
c Schedules K-1 are filed with the return and furnished to the partners on or before the due date (including
extensions) for the partnership return.
d The partnership is not filing and is not required to file Schedule M-3 . . . . . . . . . . . . . . .
If “Yes,” the partnership is not required to complete Schedules L, M-1, and M-2; Item F on page 1 of Form 1065;
or Item L on Schedule K-1.
7
Is this partnership a publicly traded partnership as defined in section 469(k)(2)? . . . . . . . . . . . .
During the tax year, did the partnership have any debt that was cancelled, was forgiven, or had the terms
8
modified so as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . . .
Has this partnership filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide
9
information on any reportable transaction? . . . . . . . . . . . . . . . . . . . . . . . .
10
At any time during calendar year 2013, did the partnership have an interest in or a signature or other authority over a financial
account in a foreign country (such as a bank account, securities account, or other financial account)? See the instructions for
exceptions and filing requirements for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F
90-22.1). If “Yes,” enter the name of the foreign country. ▶
✔
✔
✔
✔
✔
Form 1065 (2013)
Form 1065 (2013)
Schedule B
Page
Yes
11
3
Other Information (continued)
No
At any time during the tax year, did the partnership receive a distribution from, or was it the grantor of, or
transferor to, a foreign trust? If “Yes,” the partnership may have to file Form 3520, Annual Return To Report
Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. See instructions . . . . . . . . .
12a
Is the partnership making, or had it previously made (and not revoked), a section 754 election? . . . . . .
See instructions for details regarding a section 754 election.
b Did the partnership make for this tax year an optional basis adjustment under section 743(b) or 734(b)? If “Yes,”
attach a statement showing the computation and allocation of the basis adjustment. See instructions . . . .
c
13
14
15
16
17
Is the partnership required to adjust the basis of partnership assets under section 743(b) or 734(b) because of a
substantial built-in loss (as defined under section 743(d)) or substantial basis reduction (as defined under section
734(d))? If “Yes,” attach a statement showing the computation and allocation of the basis adjustment. See instructions
Check this box if, during the current or prior tax year, the partnership distributed any property received in a
like-kind exchange or contributed such property to another entity (other than disregarded entities whollyowned by the partnership throughout the tax year) . . . . . . . . . . . . . . . . . . . ▶
At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or other
undivided interest in partnership property? . . . . . . . . . . . . . . . . . . . . . . . .
If the partnership is required to file Form 8858, Information Return of U.S. Persons With Respect To Foreign
Disregarded Entities, enter the number of Forms 8858 attached. See instructions ▶
Does the partnership have any foreign partners? If “Yes,” enter the number of Forms 8805, Foreign Partner’s
Information Statement of Section 1446 Withholding Tax, filed for this partnership. ▶
Enter the number of Forms 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, attached
to this return. ▶
18a Did you make any payments in 2013 that would require you to file Form(s) 1099? See instructions . . . . .
b If “Yes,” did you or will you file required Form(s) 1099? . . . . . . . . . . . . . . . . . . . .
Enter the number of Form(s) 5471, Information Return of U.S. Persons With Respect To Certain Foreign
19
Corporations, attached to this return. ▶
20
Enter the number of partners that are foreign governments under section 892. ▶
Designation of Tax Matters Partner (see instructions)
Enter below the general partner or member-manager designated as the tax matters partner (TMP) for the tax year of this return:
Identifying
number of TMP
▲
Phone number
of TMP
▲ ▲
▲
Name of
designated
TMP
If the TMP is an
entity, name
of TMP representative
Address of
designated
TMP
▲
Form 1065 (2013)
Form 1065 (2013)
Schedule K
1
2
3a
Income (Loss)
b
c
4
5
6
7
8
9a
Alternative
Other Information Minimum Tax
(AMT) Items
Foreign Transactions
Credits
SelfEmploy- Deductions
ment
b
c
10
11
12
13a
b
c
d
14a
b
c
15a
b
c
d
e
f
16a
b
c
d
g
i
l
m
n
17a
b
c
d
e
f
18a
b
c
19a
b
20a
b
c
Page
Partners’ Distributive Share Items
Ordinary business income (loss) (page 1, line 22) . . . . . . . . . . . . .
1
Net rental real estate income (loss) (attach Form 8825) . . . . . . . . . . .
2
Other gross rental income (loss) . . . . . . . ...